How do GICs compare to something like an S&P500 index fund in terms of risk?

Question

How do GICs compare to something like an S&P500 index fund in terms of risk? Could it be argued that index funds are generally as safe as any investment? Is there any data or models to measure or gauge the levels of investment risk rather and anecdotal personal experience?

Answer 1

How do GICs compare to something like an S&P500 index fund in terms of risk?

If by GIC you mean "Guaranteed Investment Certificate", they are significantly less "risky" than an S&P 500 index fund. A GIC pays a guaranteed rate of return, so there is no real risk in terms of variance of returns. An S&P 500 index fund certainly has variance in returns, and can even lose value.

Could it be argued that index funds are generally as safe as any investment?

Absolutely not. There are many categories of "index funds" ranging from government bond funds (low risk) to leveraged equity funds (very high risk)

Is there any data or models to measure or gauge the levels of investment risk rather and anecdotal personal experience?

A common way to measure the "risk" of any investment is to look at the variance (literally the statistical variance over history) of returns. That number typically isn't published directly but is easily calculated if you can get the data. The higher the variance, the more volatile ("risky") the investment is.

Another measure for equity funds is to look at the beta. The beta is the coefficient of correlation between returns of the fund and the market overall (or some broad benchmark like the S&P 500). A beta of 1 is exactly as volatile (risky) as the benchmark. The higher the beta, the higher the risk relative to that benchmark.