Creating a balanced portfolio is one of the most important steps in reaching long term financial security. For Canadian investors, the decision between fixed income and equities is central to how a portfolio performs. Both offer unique benefits and risks, and the right mix depends on your age, goals, and comfort with risk.
What Are Fixed Income Investments?
Fixed income investments include bonds and GICs. They provide steady income through interest payments and are generally viewed as lower risk. Investors often choose fixed income to preserve capital, generate predictable cash flow, and reduce portfolio volatility.
Advantages: stability, reliable income, reduced exposure to market swings
Disadvantages: lower growth potential, sensitivity to rising interest rates, limited inflation protection
Understanding Equities in the Canadian Market
Equities represent ownership in companies, including Canadian stocks and global shares. They offer growth potential through capital appreciation and dividends. Over the long term, equities tend to outperform fixed income, making them essential for building wealth.
Advantages: higher expected returns, long term growth, hedge against inflation
Disadvantages: market volatility, potential for short term losses, emotional pressure during downturns
Comparing Risk and Performance
Fixed income provides stability but historically delivers lower returns. Equities offer greater growth potential but also higher volatility. For example, bonds may deliver predictable income but struggle to keep up with inflation, while equities can experience strong growth but suffer large drawdowns during market downturns. The right allocation depends on whether stability or growth is your priority.
Investor Profiles and Allocation Choices
Conservative investors, such as retirees, often prefer heavier fixed income allocations to preserve capital and generate income.
Balanced investors split between the two, seeking moderate growth with controlled risk.
Growth oriented investors, often younger with longer time horizons, lean toward equities to maximize long term returns.
Age, time horizon, and risk tolerance are key factors. A younger professional with decades to invest can weather short term equity volatility. A retiree who depends on portfolio income may prioritize stability over growth.
Building Diversification for Long Term Success
A diversified portfolio blends both fixed income and equities to capture the benefits of each. Fixed income can cushion volatility, while equities provide growth to outpace inflation. Allocation should adjust as goals, age, and circumstances change. Professional guidance can help ensure your portfolio is structured for long term success.
Working with a trusted advisor ensures your allocation aligns with your goals. At Bilyk Financial, we support clients with Investment Management, Risk Management, and Tax Planning strategies that keep portfolios efficient and resilient. For families focused on wealth transfer, our Legacy Planning solutions ensure investments support long term goals and future generations.
Aligned Capital Partners Inc. (“ACPI”) is a full-service investment dealer and a member of the Canadian Investor Protection Fund (“CIPF”) and Canadian Investment Regulatory Organization (“CIRO”). Investment services are provided through Bilyk Financial Private Client, an approved trade name of ACPI. Only investment-related products and services are offered through Bilyk Financial Private Client and covered by the CIPF. Financial planning and insurance services are provided through Bilyk Financial Wealth Management. Bilyk Financial Wealth Management is an independent company separate and distinct from Bilyk Financial Private Client.