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GIC rates are so bad right now that one big bank is offering a “special” rate of 0.2 per cent for one year.

That’s double – double! – the posted rate of 0.1 per cent. What’s a yield-hungry conservative investor to do? Maybe consider bank stocks.

Okay, this is risky stuff. I recall bank stocks losing roughly 40 per cent to 50 per cent their value in one particularly nasty stretch during the global financial crisis. Bank stocks fell by roughly one-third as a group when the pandemic took hold in late winter and haven’t yet recovered to the same extent as the broader market.

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This is precisely the kind of experience that drives people out of stocks and into guaranteed investment certificates. GICs are a lead-lined bunker that protects you against stock market radioactivity. That’s why they exist.

But what if 0.2 per cent won’t cut it? You could explore the many alternative GIC issuers offering 1.5 per cent to 1.8 per cent, all of them with deposit insurance from Canada Deposit Insurance Corp. or provincial credit union plans. For those who insist on the stability of a big bank, there’s one more option. Buy the bank’s shares and get your investment income through dividends rather than interest.

GICs won’t fall in value, while bank stocks can and most certainly will fall if loan defaults surge as a result of the pandemic’s effect on the economy. Mortgage and loan payment deferrals offered early in the pandemic are being wound up and some clients likely won’t be able to resume their mortgage payments.

Banks compensate you for the risk of falling share prices with a hefty dividend. The yield on Big Six bank stocks as of midweek averaged 5 per cent, with Bank of Nova Scotia leading at 6.4 per cent and National Bank of Canada trailing at just less than 4 per cent. These yields look even better than a GIC in a non-registered account, owing to the dividend tax credit.

If you need to keep your principal safe in the near to medium term, then GICs are the vehicle for you. Bank stocks can’t be trusted for this purpose. But if you’re all about investment income and need a decent yield from a security issued by a blue-chip entity, bank stocks can do the job.

-- Rob Carrick, personal finance columnist

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The Rundown

Japanese stocks should grab the attention of Canadian investors

Quick: Name a stock market that outperformed Canada’s over the past decade and recently attracted the attention of Warren Buffett. If you said Japan, congratulations. The Asian country, often held up as an example of economic dysfunction, is emerging as a surprisingly attractive alternative for investors seeking a counterweight to Canada’s stock market. Ian McGugan explains. (for subscribers)

Wall Street’s ‘fear gauge’ spikes but unlikely to be pointing to a market crash

Wall Street’s ‘fear gauge’ is soaring again, as investors spooked by Thursday’s market decline rushed to load up on options protection, but analysts said the intensity of the move in volatility does not necessarily point to a market crash. Saqib Iqbal Ahmed and April Joyner of Reuters take a look at how some investors hope to cash in from the increased volatility. (for everyone)

U.S. stock market surge may run into scary September

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A scorching stock market rally that pushed the benchmark S&P 500 to its best August in more than 30 years is entering what is historically the most volatile two-month stretch of the year, increasing the likelihood of market turbulence in the final stretch before the U.S. presidential election. David Randall of Reuters has a look at what lies ahead. (for everyone)

Also see: 2016 all over again? Investors ready for big market moves as U.S. election nears

Others (for subscribers)

The week’s most oversold and overbought stocks on the TSX

Friday’s analyst upgrades and downgrades

Thursday’s analyst upgrades and downgrades

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Number Cruncher: Six spinoff stocks that hold appeal for dividend investors

Number Cruncher: Twenty investing opportunities in Canada’s lagging real estate sector

Others (for everyone)

ECB takes the hot seat: World market themes for the week ahead

Canadian dollar outlook more bullish as global economy recovers: poll

Oil market’s rebalancing is stalling

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Globe Advisor

Three strategies to build an RESP nest egg

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What’s up in the days ahead

In a quarter of enormous pressure on dividend payers everywhere, Canadian blue-chips proved to be among the most resilient in the world. Not only did big Canadian corporations resist the global wave of dividend cuts in the second quarter, they actually increased their collective payout by 4.1 per cent. Tim Shufelt will explain this weekend.

Click here to see the Globe Investor earnings and economic news calendar.

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Compiled by Globe Investor Staff

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