Everyone needs these interesting pointers if you are investing or planning to invest in guaranteed investment certificates. Once you master these tricks you will have the best GIC rates and the highest returns in your investment.
- What is a GIC?
GIC is the abbreviation for Guaranteed Investment Certificate. It is a type of investment in Canada that is issued by trust companies or banks. These investments usually require you to invest your earnings for a period to receive a guaranteed return rate.
- How do GICs work?
You will be required to invest at least $500 of your money and agree to leave the funds in your account for a period of specified time which can range from a month to ten years. GICs are considered safe investments for your principal investment is secure.
- How much do you need to invest in a GIC?
Absolutely nothing, there is no fee whatsoever to invest in a GIC.
- Types of GICs
There are numerous types of GICs that you can choose from depending on your financial situation and the financial institution. There are short-term and long-term GICs, redeemable and non-redeemable, registered and non-registered, etc. The list is long which can be very confusing.
- Variable-rate vs. Fixed-rate GICs
In fixed-rate GICs, you will agree on a specific rate that your investment will accumulate all interests. This interest rate can’t change throughout the whole of the term of the GIC. You, therefore, know what you will get at the end of your term.
Variable-rate GICs change constantly throughout the term that the GIC is effective and depends more on how the stock market is doing.
In both cases, however, you find that your initial investment is always secure.
- Registered V. non-registered GICs
The registered GICs have special government-approved tax-sheltered savings plans that are pretty beneficial. These GICs can also be held in RESPs, RRSPs, and TFSAs.
Non-registered GICs don’t get any benefits from the federal government does not usually register them. All members, therefore, have to claim earned interest as taxable income every year.
- Redeemable V. non-redeemable GICs
Redeemable GICs are good if you plan to access your funds before the agreed length is reached. These GICs allows you to withdraw your funds without incurring any penalties.
- Short-term V. Long-term GICs
The short-term GICs are those investments that have terms going for less than a year while the long-term GICs can go from one year to ten years which is the maximum GIC length.
- Market-linked GICs
Also, Equity-linked GICs. These GIC investments are a little bit riskier compared to the traditional GICs. This is because the market-linked GICs are part GIC, and also part stock market investment. Your principal deposit is still guaranteed at the end of your GIC agreed term.
- Foreign currency GICs
Some banks and other financial institutions also offer GICs in foreign currencies like U.S. dollars. Any investments made on these GICs usually earn interest in the foreign currency invested in, for example, if you invest in U.S. dollars, then the interest rates are calculated in that currency.
- How frequently are interests added to your GICs?
When applying for a GIC package, you will fill in how frequently you will want your GIC interests compounded.
- Which GIC is best for you to invest in?
You need to, first, understand your financial situation and priorities before you invest in a GIC. And then understand the duration that you plan to commit your cash to the investment.
Research helps a great deal. Shop around and compare the many different options before you decide which one is best for you.