With short-term interest rates and cash equivalents paying close to 5% it is no longer a challenge to convince investors that keeping one to two years of their cashflow needs in stable cash, i.e. bucket one, makes sense. This cash cushion affords you the ability to deal with life’s economic uncertainties, and allows you to easily handle the surprises that would otherwise catch you off guard financially, in other words it lets you sleep at night. Accordingly, this cash also provides you the emotional patience to let your long-term, bucket three, investments to grow.

But what about your midterm funds allocated to bucket two? Investors may want to seek increased cash flow through the utilization of income notes¹ within their portfolios as potential monthly interest payments are still in the 9 to 10% range². As a reminder, income notes are debt obligations of Canada’s major banks that track different sectors of the stock market. These notes pay investors a monthly interest payment in rising, sideways, and down markets that fall up to 30%. Investors find this attractive when they currently need income but do not require their capital for the foreseeable future as the principal can be tied up for up to seven years, although notes, on average, mature early in two to three years.

Many investors tend to hold income notes in TFSA and RRSP accounts for the tax efficiency; however, depending on family needs, they can be suitable for non-registered or corporate accounts. Regardless, income notes, like all investment solutions, must be part of a financial plan that is tailored to your goals and your life.

As Warren Buffett’s teacher, and father of value investing, Benjamin Graham said so eloquently: “The best way to measure your investment success is not by whether you’re beating the market, but by whether you’ve put in place a financial plan and a behavioural discipline that are likely to get you where you need to go.”

That is what true investing success is all about, hitting your goals and making your financial aspirations come to fruition!

Randy, Ian, and Harrison

1. This blog post is not to be construed as an offer to sell, or solicitation for, or an offer to buy any R&R Investment Partners' strategy or other securities. Consideration of individual circumstances and current events is critical to sound investment planning. All investments carry a certain degree of risk. It is important to review objectives, risk tolerance, liquidity needs, tax consequences and any other considerations before choosing a strategy.

2. Yields/rates are as of May 22, 20224 and are subject to availability and change without notification. Minimum investment amounts may apply.