CASE STUDY
Imagine you've inherited $25 000 and you plan on using it to pay for your post-secondary education fees (in 2-3 years).
There are a number of investment options from CIBC.
There are a number of investment options from CIBC.
MUTUAL FUNDS
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CIBC separates their mutual funds into three categories: savings funds, income funds, and growth funds. Savings Funds mainly consist of money market securities, and are low-risk, low-return. The highest current yield of all savings funds is 0.93%. Income funds invest in a combination of securities and stocks. As this is the case, there is low-to-medium risk associated with investing in income funds, and they will generate more income than savings funds. There is potential for capital growth, allowing you to sell your investment for more than what you bought it for. At this time, the highest current yield of all income funds is 14.09%. Growth funds are higher risk funds that will also provide the highest return. They invest primarily in stocks, and may be rather volatile in the short term. The CIBC Canadian Small-Cap Fund provides the highest current yield out of all growth funds at a rate of return of 33. 47%.
GUARANTEED INVESTMENT CERTIFICATES
At CIBC, there are a number of short-term GICs.
TAX FREE SAVINGS ACCOUNT
A tax free savings account is a kind of savings account where you pay no tax on the interest you earn, or when you withdraw amounts from the account. It has a maximum contribution limit of $5500 a year and an interest rate of 2%, and you can withdraw money at any time. Furthermore, you can put mutual funds and GICs in your TFSA, and the income you earn from those investments are tax-free.
PRECIOUS METALS
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At CIBC, you have the option of investing in precious metals. You can choose from gold or silver bars, gold or silver coins, specialty collector coins, or certificates. A 5 ounce gold bar costs about $7100 CAD, and a 100 ounce silver bar costs about $2100.35.
CONCLUSION
It would be best for you to invest in an income fund, and place it into a tax-free savings account. As income funds are low-to-medium risk, there is not too much to worry about. In addition, it provides a good rate of return, allowing you to generate more wealth without making overly risky investments. Next, the benefit of placing it into a tax-free savings account is that the investment income you earn won't be taxed, allowing you to keep all that you earn.