Interest rates are at record lows and stock markets are volatile. Safety has become a top priority but many of the so-called "safe" investments are nothing more than expensive gimmicks.

I spent two mornings recently doing radio interviews about my new book with CBC morning shows across Canada. By the time the marathon was over, I had talked to 19 stations from St. John’s to Whitehorse and just about everywhere in between.

One of the questions I was repeatedly asked related to a chapter in the book titled: “There is no safe place for your money”. The hosts wanted to know exactly what I meant by that.

The short answer is that it means just what it says. There is almost nowhere that you can put your money today with complete confidence that you will get the entire principal back and earn a high enough investment return to make a profit after taxes and inflation are taken into account.

Some people are under the illusion that just protecting their capital is safety enough. It’s not. Even with inflation running at a relative modest annualized rate of 2.3 per cent (December figure), every $1,000 in cash that you tuck into a safety deposit box will only buy $893 worth of goods and services at the end of five years. After 10 years, your purchasing power is down to $797. There’s nothing safe about that.

In years past, you could sock your money away in a five-year GIC which might pay you anywhere from 4 per cent to 8 per cent and on occasion even more. We have not seen anything close to 8 per cent in the past decade but major banks were paying more than 4 per cent for five-year terms in the spring of 2002 and about 3.5 per cent in the summer of 2007. Now the best you can get from the giants of Bay Street is 1.85 per cent. Smaller financial institutions, notably some Manitoba-based credit unions, are offering five-year rates in the 3 per cent to 3.5 per cent range but they only have a tiny share of the GIC market and very few people even know about them.

Let me reiterate a point I have made many times before: risk-free investments do not exist. There are many securities that are low risk but if you’re looking for zero risk, forget it.

That hasn’t stopped financial engineers from devising products that appear to be risk-free while holding out the potential of above-average returns. Since they usually offer high commissions, retailers from banks to brokers have welcomed them. These are not fly-by-night con artists. Even some of our largest financial institutions have found that peddling the illusion of safety works, especially in the wake of two stock market crashes already in this young century.

I look at these securities as “dream-busters”. They are designed to create the illusion that investors can earn high profits without putting anything at risk.