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GICs

GICs (guaranteed investment certificates) are among the simplest and most reliable investments Canadians can make. When you purchase a GIC, you are, in essence, lending your funds to a financial institution for a specific amount of time at a set interest rate. Terms can range from 30 days to up to ten years; generally, the longer the term, the higher interest you will earn. When the term is up, you get your principal back, plus the interest that you’ve earned. There’s no surprise, no drama, no risk.

No matter what happens in the market over that term, you still know exactly what you will be getting back. For example, during the Great Recession of 2008, the only investment option that didn’t drop was GICs.

On the flip side, by their very nature, GICs don’t generate a lot of return. It’s a basic principle of investing: Low risk = low return. Even if the markets are surging, a GIC will still only generate a modest amount of interest for you.

GIC FAQs

When are GICs a good idea?

At Mindset, we don’t take risks with tomorrow’s paycheque. For certain investors, GICs offer peace of mind since they enhance the cash portion of one’s portfolio and reduce volatility.

For example, if you’re retired and taking regular income from your investments, GICs allow you to earn some interest while you keep your money safe until you need it. Some investors purchase numerous GICs that mature at different times, so you always have funds available just when you need them (maybe right before your RRIF withdrawal). This strategy is called a GIC ladder.

Are they safe?

Yes. Even in the highly unlikely event that the financial institution that issued your GIC fails, most GICs are guaranteed by the Canada Deposit Insurance Corporation up to $100,000 (principal and interest).

Are there any extra or hidden fees?

Clients pay no fees or commissions to buy GICs.

Why purchase a GIC from Mindset instead of the big banks?

Because we lead with our best! Through HollisWealth, we can access great rates from all credit unions and banks across Canada. When we shop the market, our loyalty is to the highest rate of each day — which we deliver to you, our client.

Can I cash my GIC in early?

While there is such a thing as a redeemable GIC, the interest rates are lower than for GICs with a locked-in rate, so our clients generally purchase non-redeemable GICs. With this type, you would forgo your interest if you were to cash in early. There is one exception: if the holder passes away, the GIC will unlock and mature at death.

How do I get started with Mindset?

Mindset is a boutique firm for people who want to get serious about their money. If you’re interested in working with us, we invite you to set up an appointment so we can get to know you and learn about your life and current financial situation, as well as your goals and aspirations. After this discovery process, we can make recommendations based on your financial situation. We can set up a Mindset investment account for you and together, we’ll take it from there.

Is there a minimum investment?

The minimum to invest in a GIC from Mindset Wealth is $25,000.

Can I put a GIC in my RRSP or RIF?

GICs can be registered or non-registered, so you can put one into an RRSP, TFSA, RRIF, LIRA, or RESP if you like. Or keep your GIC unregistered if you prefer. We can advise you on the best course of action.

Is a GIC preferable to a high-interest savings account?

Since the rate on a GIC is locked in, you are sure to get a certain amount of interest. However, your money is more accessible in a high-interest savings account than in a GIC. It may be helpful to keep some funds in a GIC and some in a savings account as part of the cash portion of your portfolio which can be accessed in the short term when you need it.

What is the downside to GICs?

Because the interest rate on GICs is relatively low, they are not a good strategy for building wealth. In order to make your money grow in the long term — which is what investing is all about — you must take some risk. While GICs can certainly be a part of your portfolio, you should hold a carefully considered blend of instruments to help you cover all your financial bases: wealth accumulation, capital preservation, and income distribution.

 

Mindset Wealth can help you with all your GIC needs. Contact us to get started today.

November 26, 2020
TODAY's BEST GIC RATE:

1.10%

1 Year1.05%
2 Years1.43%
3 Years1.65%
5 Years1.90%
90 Day Cashable0.25%
30 Day Cashable0.05%

Rates sourced from the Bank of Canada.

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