ETF suggestion for my son

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I convinced my 18 year old son to open a securities account and start investing his savings. He is still a student and has not yet reached the stage of investing for retirement. However, he wants to invest for his medium-term projects. I found that the TFSA account was best suited for his needs. I wanted to suggest a less risky ETF so that his capital would still be protected but which would generate a better return than the bank’s savings account. Do you have any suggestions?

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Asked on June 16, 2024 6:14 am
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There is a bit of difficulty there when it comes to the equity markets with a 12-36 month timeline. I would say this is a very short time horizon.

Someone has two choices here really. They can buy an equity ETF and take on the risk that over a 12-36 month time period there is pretty much zero guarantee your capital is preserved. Yes, the markets could go up another 10% a year for three years. However, he could be sitting at the end of that time horizon and the markets can be down by 30% too and then he's in a very difficult position.

For me personally, if I ever had money that I possibly needed in 1-3 years, it wouldn't really touch the stock market. I'd more so be looking to store it in some savings vehicle that guarantees my initial capital and provides me with a reasonable return. Think of a high interest savings ETF, GIC, or a money market fund.

It does seem like by your initial message you do understand this though, but I felt I should bring it up just in case.

For funds that can guarantee capital and provide a much higher return than a typical bank savings account, you could look to something like CASH.TO or a money market fund like BMO's ZMMK.

Keep in mind as well, however, that as interest rates decline, which they are likely to do moving forward, the interest paid on these ETFs will also decline.

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Posted by Dan Kent
Answered on June 17, 2024 8:31 am
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Hey there. By "medium term prospects" what timeline are we looking at here? Will help me provide some guidance. I can't really provide any commentary if I don't know the timeline.

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Posted by Dan Kent
Answered on June 16, 2024 11:25 am
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I would say 12 to 36 months!
(account@danbouf.simplelogin.com at June 16, 2024 1:50 pm)