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Are GIC's Worth It?

Author: Marion Humphries, Registered Retirement Consultant
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Guaranteed investment certificates are available through banks, credit unions, trust companies, and life insurance companies. A GIC is a form of bank debt.  The GIC investor is lending money to the financial institution for a fix term, to receive a specified rate of return in the form of interest.

GIC’s have a place in your investment portfolio.  For those just starting out, a GIC provides a safe and secure investment to grow your money. For those looking for a safe place to invest their money in the short term,  GIC’s make sense.   GIC’s can be used for income purposes  in retirement.   For example a GIC ladder will provide a steady stream of income for a fixed period of time. 

GIC’s are considered a safe and conservative investment.  Your principal amount is protected by CDIC (The Canadian Deposit Insurance Corp.).  The deposit insurance will protect your principal amount  up to $100,000 per financial institution.    For example, if you have a GIC in your name, and your spouse has a GIC in his(her) name, and you have a joint GIC account with your spouse, the Financial Institution will cover your principal amount up to 3 x $100,000.
GIC’s are a safe place to park your cash for the short term.  Long term GIC’s are offered in 1, 2, 3, 4 and 5 year terms.  Each term offers a specified rate that is locked in for the term of the investment.   Short term GIC’s vary from 30 days to 270 days.

When do GIC’s make sense?

GIC’s are an ideal savings vehicle for the short term.  If you have a savings goal that matches the term of the GIC, you will be able to rest assured that your money will be there when you need it.

GIC’s generally offer a better rate of return than a savings account at the bank.

What are the disadvantages of investing in GIC’s?

There is usually a minimum amount required to purchase a GIC.  Usually a minimum of $500 to $1000 is required depending on the institution.

The investment must be held in the GIC until maturity.  Early redemptions may be possible under special circumstances.

Early redemptions may be subject to a penalty fee.

What are the advantages of investing in GIC’s?
  • GIC’s are considered a low-risk investment.
  • Your investment is guaranteed to grow, regardless of how the markets perform.
  • GIC’s are considered a secure investment since it is backed by the FI and the CDIC.
  • The interest rate is guaranteed.
  • GIC’s can be held in non-registered or registered plans.  They can be held in the client’s name or in a joint account.
  • GIC’s  are not complicated and would appeal to most investors.