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Have you ever stopped to ask yourself, why do we invest?
For a small number of investors, it’s about the excitement of the markets. But for most Canadians, investing is a necessity, a way to stay ahead of inflation and taxes that quietly erode our purchasing power over time.
Over the last decade, inflation has consistently outpaced wage growth, reducing what our dollars can buy. To put that into perspective, $100 in 2015 now has the purchasing power of about $78.22 in 2025. Think about your last trip to the grocery store; it’s hard not to notice how much lighter the bags feel compared to just a few years ago.
Despite this erosion of value, many Canadians continue to flock to GICs, which pay interest income, the most heavily taxed form of investment income. While it may feel safe to see your balance hold steady, the reality is that when a GIC matures, those dollars buy fewer goods and services than before. The real risk isn’t volatility; it’s the silent loss of purchasing power over time.
Building a resilient, diversified portfolio today means going beyond the traditional mix of stocks and bonds. Including five or six asset classes – such as equities, fixed income, private real estate, infrastructure, and credit – across multiple sectors and geographies gives investors a better chance to outpace inflation and grow long-term wealth. Historically, both the S&P/TSX Composite Total Return Index and the S&P 500 Total Return Index have delivered returns that comfortably exceeded inflation over the past 20 years.
Beyond portfolio strategy, efficient tax and cash-flow management are just as important, particularly for retirees. After-tax income determines real spending power, helping maintain lifestyle, cover essential expenses, and support long-term stability. Managing taxable income can also help minimize potential Old Age Security (OAS) clawbacks.
By emphasizing tax-efficient sources, like dividends, capital gains, and return of capital, investors can help offset “inflation creep” and preserve purchasing power.
As we look ahead to 2026, staying diversified, disciplined, and tax-smart remains the best way to safeguard your financial future.
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