How Should Reserve Funds Be Invested?

In Episode 9 of Coffee Chat with Steve, we dive into a topic that many strata councils and condo boards overlook: investing the reserve fund. With millions of dollars sitting idle in checking and savings accounts, many buildings are missing a huge opportunity to grow their funds and improve their financial health — without taking on unnecessary risk.

The missed opportunity: idle funds earning less than 2 percent

Many strata corporations and condo associations have significant cash reserves, sometimes in the hundreds of thousands or even millions. But most of that money is just sitting in checking or low-interest savings accounts, earning returns between 0.5 percent and 1.5 percent.

This passive approach results in missed earnings year after year, which could otherwise be used to offset future fee increases, avoid special assessments, and strengthen the long-term capital plan. Instead, those funds just sit there, barely keeping up with inflation.

The smarter strategy: staggered GICs

Steve suggests a simple but effective solution: staggering investments in GICs (Guaranteed Investment Certificates). The key is to align the investment terms with your capital planning needs. That means referencing your depreciation report or reserve fund study to understand when major expenses are coming. Once that is clear, the reserve can be divided into short- and mid-term GICs, such as:

• 1-year GICs
• 3-year GICs
• 5-year GICs

This is often called a laddered or staggered investment strategy. It allows a portion of your funds to mature every year, giving you liquidity to complete upcoming capital projects while still earning higher returns on the rest.

Why planning matters

You should never lock all your reserve money into a long-term investment without first understanding what large expenses are coming up. Your depreciation report or reserve fund study gives you the timeline and cost estimates for future repairs, such as roof replacements, HVAC systems, and exterior upgrades. Without this insight, you could accidentally tie up funds in a 5-year GIC, only to realize that you need that money in year two — and be stuck with penalties or a cash shortfall.

The benefits of investing wisely

With a well-structured plan, many stratas could easily move from 1 percent returns to 3 to 5 percent. That difference is huge when scaled across millions of dollars. Benefits include:

• Lower condo/strata fees for owners over time
• Reduced reliance on special assessments
• Improved reserve fund health, which can boost buyer confidence and resale value
• More predictability in long-term financial planning

How Stelor can help

Stelor is designed to make capital planning clear, organized, and actionable. Our platform helps property managers and strata councils track when reserve projects are coming due, forecast funding needs accurately, and model scenarios based on different investment strategies. If your reserve fund study or depreciation report is outdated or difficult to interpret, we can help you extract the key insights you need to make smart investment decisions.