I’ve never owned stocks but I've saved $265,000 in cash. How can I 'set and forget' my life's savings so I can live off dividends in the next 3 years?

High-yield ETFs

If you’re looking for strong returns in a short period of time, high-dividend stocks with market stability are key. That’s why exchange-traded funds (ETFs) are ideal.

ETFs are investment offerings that give you access to multiple stocks, bonds and other assets in one, simple fund. Managed by financial experts, ETFs are designed to offer growth and stability, which makes them ideal for someone seeking a cost-effective investment with the built-in advantage of diversification.

Some ETFs specialize in high-yield dividends, meaning they generate steady payouts while maintaining a proven track record. Even better, there are short-term ETF options designed to yield returns in a relatively short period.

ETFs offer diversification, liquidity and lower fees compared to individual stocks or mutual funds, making them an attractive investment. They allow investors to spread risk across multiple assets while benefiting from passive income through dividends.

But they still carry some market risk, meaning their value fluctuates with economic conditions. High-yield ETFs may offer stronger returns, but they are not immune to volatility. Investors should assess their risk tolerance and investment timeline before committing. If you’re feeling uncertain, consult a financial adviser before diving in.

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Short-term treasury bills

Not comfortable with stock investments? Well, Treasury bills — or T-bills — might be just what you need.

Backed by the Canadian government, short-term Treasury bills can be a low-risk alternative to the stock market. These bonds are highly liquid and start maturing in one year or less. And because they’re traded on a secondary market, they remain in high demand, making it easy to sell them if needed.

The trade-off? Returns from these bonds generally lag stocks or ETFs. However, if your priority is safety over growth, Treasury bills might be a great fit.

Real Estate Investment Trusts (REITs)

Want passive income without the hassle of being a landlord? Real estate investment trusts (REITs) offer high-yield dividends with monthly payouts, making them an attractive short-term investment option.

To reduce risk, opt for publicly traded REITs, which are regulated by theCanadian Securities Administrators (CSA) and offer more transparency than non-traded REITs.

It’s important to know that some non-traded REITs come with high up-front fees — which could eat into your earnings.

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Staying off the market: HISAs or GICs

If the stock market still feels too risky, high-interest savings accounts (HISAs) and [Guaranteed Investment Certificates]https://money.ca/investing/best-gic-rates-canada) (GICs) offer a safe place to park your money while earning interest.

A GIC is a secure option that locks in your money for a fixed period — ranging from a few months to a few years — usually at a higher interest rate than a standard savings account. However, there’s a catch: once your money is in GIC you likely won’t be able to withdraw it without penalties until the term is up. This makes GICs a good choice if you’re confident you won’t need access to your funds before then.

A HISA, on the other hand, provides more flexibility. While it won’t offer returns as high as an aggressive investment, it does earn more interest than a traditional savings account and allows you to access your funds whenever needed. Annual percentage yield (APY) rates up to 4% were common as of writing — making these accounts a solid option if you’re looking for both safety and liquidity in the short term.

Since your goal is to preserve capital while earning modest growth over three years, either option could work: GICs for higher rates with restrictions, or HISAs for flexibility with slightly lower returns. The right choice depends on whether you’re comfortable locking up your savings or if you’d prefer to keep your cash accessible.

Investing doesn’t have to be scary, even if you only have three years to make it work. Whether you go for high-yield ETFs, Treasury bills, REITs or safer options like GICs and HISAs, there’s a way to grow your $265K without taking on unnecessary risk.

The key? Find the balance between risk and reward that works for you. And, if in doubt, get expert advice before making a move.

How to invest $265K to earn monthly income

If you have $265,000 to invest and your goal is to create a portfolio that provides regular, consistent income then a diversified approach is critical. To achieve this, consider high-yield ETFs as they provide dividend payouts while spreading risk across multiple stocks, making them a strong option for steady income.

Another good option are REITs as these assets can boost cash flow with monthly dividends from real estate properties, without the hassle of direct ownership.

For lower-risk alternatives, short-term Treasury bills offer stability and liquidity, though with modest returns. If safety is the priority, Guaranteed Investment Certificates (GICs) or high-interest savings accounts (HISAs) provide secure, predictable interest — ideal if you need flexibility or a locked-in rate. A mix of these options can generate reliable income while protecting capital.

For instance, allocate 40% of your portfolio to high-yield ETFs, such as the Vanguard High Dividend Yield ETF (VYM) or the iShares Canadian Select Dividend ETF (XDV). The expected yield is betweeen 3% to 5% annually or approximately $3,180 to $5,300 per year in earnings.

Allociate 25% of your portfolio to REITs, such as Canadian Apartment Properties REIT (CAR.UN), RioCan REIT (REI.UN). You can expect an annual yield between 4% to 6%, which translates into an annual income between $2,650 and $3,975.

Invest 15% in short-term T-bills with an expected yield between 4% and 5%, which translates to a potential income of $1,060 to $1,325 each year.

Finally, save 10% of this nest egg in a high-interest savings account (HISA). Choose an aggressive payout, between 3% and 4% and you can expect an annual income of $795 to $1,060.

Total earnings based on $265K portfolio

Based on the proposed portfolio, you can expect to earn between $8,877 to $13,250, per year, from your invested portfolio.

Sources

1. Ipsos: Many Canadians do not feel knowledgeable about investing and/or comfortable investing their own money (May 15, 2024)

— with files from Romana King