I started investing decades ago using Canadian GICs (like US CDs). What was my motivation? I wanted to get a better return than leaving the money in a savings account, and I wanted it to grow at least as fast as the inflation rate. I also wanted to avoid risk.
Both bank savings accounts and a Canadian Guaranteed Investment Certificates (GICs) are considered largely risk-free investments. Why? Because the federal government guarantees you will still get all of your money back even if the bank or the GIC-issuer cannot. When it comes to saving for retirement, having some or all of your investments in risk-free assets can be very helpful.
I have since moved on to stock market investments. What was my motivation? The stock market has historically provided average annual returns of greater than 7% and that is better than what I get by sticking to GICs. However, the stock market can also go down in value, sometimes for inexplicable reasons, and no one guarantees that you will get back what you put in, let along make a profit. Stock investments are risky. Yet if the time to retirement is long enough, it can be helpful to have at least some of investments in stocks.
Then there are a whole pile of other investment types where it can sometimes be hard to figure out if they are risky or risk-free. Things like preferred shares, mortgage backed securities, convertible debentures, etc, However they aren’t really needed and the tag line for this blog is: Personal investment simplified