Some Basic Information About GIC Rates
What are GIC rates? Well first of all, a Guaranteed Investment Certificate or GIC as it is commonly known in investor circles, is a type of Canadian investment that guarantees a certain rate of return in a certain amount of time. This is considered a low risk type of investment while other financial products such as stocks and bonds are considered a higher risk.
The main advantage to the GIC is that it is a rate of return that is guaranteed, just like fixed mortgage rates offered by lending institutions. There are a large amount of investors that look at this as an excellent way to invest their money because they know that they will receive a good return unlike stocks or bonds.
Stocks and Bonds are considered variable and sometimes risky investment because the amount of return that you will see actually depends on the state of volatile financial markets. GICs are much more flexible and guaranteed for a certain amount of return, so of course, these investments are quite low-risk and very popular.
In most cases, these term-lengths will vary between six months to ten years. Of course, the longer-term investment will have higher rate of return than the shorter-term investment. When your GIC reaches its maturity you will be able to access not only your initial investment but also the interest that you have accrued as well.
Another factor that will determine the interest rate that you will receive is the interest rate that has been officially set by the Bank of Canada. By no means can these rates be altered and as a result you are “guaranteed” to earn at least a certain amount of money for the term of your investment.
There are basically two types of certificates: redeemable or unredeemable. The redeemable certificates are those that you are able to redeem before their overall maturity rate. The certificates that allow you to get an early withdrawal will often stipulate that you will have to pay a penalty if you wish to cash out before it reaches maturity. The unredeemable certificates will not allow for early withdrawal at all; you must wait until the certificate has reached its maturity rate. But again, to receive the most financial benefit, as far as higher interest earnings and therefore higher return, the best choice would be to use an unredeemable certificate if you can. This option is a popular savings choice when planning for a large purchase such as a house or car.
GICs are generally known to offer some great interest rates. Of course, the biggest benefit that a GIC offers is security. The amount of initial cash that you invest is safe. With a fixed rate you will also be guaranteed growth and an easy way for you to project the value at the time of maturity. But, ultimately, it is nice to have the flexibility in terms of the various plans offered.
But if you are looking for a great investment with a low risk you should really consider trying these GIC certificates. These are great investments to add to just about any investor’s portfolio and will offer a good return on your overall initial investment. And of course the best part is that they are a lot safer because the rates are guaranteed, unlike the investments you would make in stocks and bonds. Ultimately, before investing in any program, though, you should really make sure that you understand all of the terms and conditions of the plan. You should have a talk with your investment broker about GIC investments to find out more detailed information and see if it’s the right choice for your financial goals.
Before shopping for a home, compare the different mortgage rates that are being offered. It would be wise to move your funds into safe investments in the meantime, as guaranteed GIC rates can give you peace of mind.
Financial Stock:
The Bogleheads' Guide to InvestingThe Bogleheads’ Guide to Investing is a slightly irreverent, straightforward guide to investing for everyone. The book offers sound, practical advice, no matter what your age or net worth. Bottomline, become a Boglehead and prosper! Originally just the chat-line ruminations of Boglehead founder Taylor Larimore, and Morningstar forum leading cohorts Mel Lindauer and Michael LeBoeuf, their trusted advice has been brewed and distilled into an easy-to-use, need-to-know, no frills guide to building up your own financial well-being – so you can worry less and profit more from the investments you make. Invest like a Boglehead, and let their grassroots investment wisdom guide you down the path of long-term wealth creation and happiness, without all the worries and fuss of stock pickers and day traders. If you face a financial crisis or problem, or simply want to know what is prudent to do with the money you save, the Bogleheads will have the answers you need to help you gain your financial footing and keep it.
