Guaranteed Investment Certificates (GIC) are a viable and safe investment channel that can give you good rates of interest. It is ideal for investors that are looking to earn interest but also prefer the flexibility of a short-term option that allows them to encash the investment in a short while if needed. To get a clear view of your choices, check out the GIC page at our CompareMyRates website. The search bar gives you a range of options such as the amount and period for which you’re looking to invest, the location where you live, and the kind of GIC you’d prefer. Add your choices, and the page will give you a complete list of the plans available so you can make an informed choice.
Read ahead for some detailed information about Guaranteed Investment Certificates and how they work:
By investing your money in the Guaranteed Investment Certificate (GIC), you can be assured of a good interest and a return of the initial amount you invested or the principal. You can make this investment in a bank or any other financial institution for the length of time or term that suits you best. These terms can range from as short as 30 days to as long as 10 years. Of course, the longer the term, the higher will be the amount of interest you earn. Although GICs may not earn you very high rates of interest, they do offer benefits such as:
What makes GICs an extremely attractive investment is that they are very versatile. You can choose the category that best suits your investments needs:
The Government of Canada offers assurance on the eligible deposits that investors make with the members of the Canadian Deposit Insurance Corporation (CDIC), a federal Crown Corporation. By investing in any of the CDIC member firms, you will get automatic insurance without the need to pay additional charges. You can learn more about CDIC insured GICs.
If you’ve tried your hand investing in the stock exchange, it is understandable that you would prefer an investment option that is free of market fluctuations. And, if you’re investing your retirement money, you’ll want an avenue that keeps your money safe. Putting your money in the conventional Registered Retirement Savings Plan (RRSP) or any other savings plan is safe but not likely to earn you attractive rates of interest.
What you need is an investment channel that keeps your money secure but also earns you adequate interest rates for the investment to make sense. Let’s begin by ticking off the traditional options you’re well aware of:
Aside from these options, with some smart thinking, you can find other investment channels that are guaranteed, secure, and offer you attractive interest rates.
When you’re ready to make an investment, your first thought is to approach the local bank and buy a GIC. Should you choose to buy a GIC at any of the major banks of Canada, you’ll find that the interest rates aren’t as competitive as what smaller institutions offer you. In addition to all these options, you can find other channels - simply by searching on the internet. You’ll find several websites that offer you comparative information on the available GICs and term deposit rates offered by organizations such as:
Among the reliable websites, you can look at are Cannex Financial Exchanges and CompareMyRates. Some websites also offer information on the best rates you can get in case you invest through a broker. Typically, these rates are not available to the general public investing through conventional channels.
You’re probably familiar with the term mortgage brokers. They are the agents who scout the market for the most economical mortgage interest rates for their clients. Deposit brokers are similar to mortgage brokers and can find you investment options that give you the best return on investment. Like, for instance, they’ll find you GICs and other guaranteed investment products with the highest interest rates. The best positive of working with these agents is that you won’t need to pay them any charges. That’s because the financial institution you invest in pays their fees.
When you’re ready to find a good broker, log onto the website of the Registered Deposit Brokers Association. This website will give you details of over 1,600 brokers and their affiliates in different regions of Canada. You can simply find and contact the agent operating in your area. These brokers can help you find the GICs, annuities, term deposits, and other guaranteed investment products that offer you the best rates of interest and other terms. Most such agents can get you interest rates that are a whole percentage point higher than the bank’s posted rates. Of course, this factor is dependent on the investment term and individual financial organization.
Here’s an example. Say, you check with a retail bank at the physical location and they quote an interest rate of 1.85% per year on a five-year GIC. But, if you approach the same bank via a broker, you may be able to get rates of 2.7% each year for the same 5-year GIC. Brokers and agents typically have access to both major and smaller institutions that may provide better rates of interest. Smaller organizations can afford to pay these rates because they work with a more economical infrastructure as compared to the larger institutions.
You’ll find that working with an investment broker has several advantages:
The biggest downside of working with brokers is that many financial institutions don’t accept investments through agents. If you’re looking to invest with them, you may have to approach them personally. Like, for instance, Royal Bank of Canada, various other smaller banks that operate online, and credit unions. Such organizations may offer you higher rates of interest because they aren’t paying any fees to the brokers.
For this reason, say, you’re looking for investment products that give you high-interest yields for the funds you own in RRIF, RRSP, TFSA or non-registered accounts. Accordingly, you might want to choose these organizations even if you must contact them on your own.
You also have the choice of investing in a portfolio that includes high-grade corporate bonds and preferred shares. However, you’ll have to be prepared to deal with the risk that accompanies this investment option. President of the Registered Deposit Brokers Association, Brian Smith opines, “Baby boomers are at a point in their life where they're retired or heading into retirement. With the [market] volatility we've seen over the last few years, many people want guarantees because they say they can't afford to gamble with their retirement."
Before you make the final decision on the best GIC to invest in, keep these considerations in mind:
To further help you with your research, here are a few examples of the best GIC rates in Canada: