Justise wrote:Low interest rates are additionally hidden taxation. With over 3% inflation, the returns after tax is definitely negative.
The OP, Otto, already has a range of other investments in other asset classes. Holding bonds and/or GICs in the FI component of one's asset allocation might be the perfect thing. As an example, it is, to a significant extent, for my 93 yr old mother.
In my opinion, in investing, we have to do some critical thinking. First, we have to see what causes the present debacles.That is to say where market forces came from and where market forces are going. Where do we start?
1. I will start with "irrational exuberance". Those new-kids-on-the-blocks were buying pricey RE with their new found wealth from the tech irrational exuberance. That is to say part of the money went to RE. When the tech sector crashed, many are poorer except perhaps the new-kid-on-the-blocks. The catch word is RE.
2. Greenspan created the 2nd wave of "irrational exuberance" when he lowered the interest rates to historical low and maintained it there for a long period of time. It was this factor that drove the WHOLE-WORLD's RE prices to crazy levels including those of US, UK, Spain, Australia, Canada, Ireland, Asia excluding Japan. This is misallocation of capital. So the bubble burst in 2008. The Jimmy-come-lately got burnt and so are those using the house as the ATM. This is the result of easy-money-has-consequences. The unintended consequences are the consumers and mortgagees in trouble, meaning the economy is in trouble from the false boom sucking money to the non-investment sector i.e. housing. The repercussion effect is that the banks are in trouble make worse by the economies in trouble.
3. So helicopter Ben got no choice but to keep the rates lower still, meaning robbing Peter to help Paul (Paul includes the biggest debtors in absolute terms - the government debts). Peter, the saver, got screwed.
4. Where are we going from here? Low interest rates are here to stay both from the US and EU debts and economic growth points of view. The result is the rich gets richer, the saver gets screwed.
5. With the baby boomers retiring, with the low interest rate environments, the rush is to dividend paying stocks. With low interest rates, the corporations refinanced debts at much lower rates and therefore helped in the bottom lines for years. Therefore, the perfect place to be is in dividend paying stocks which is also tax efficient.