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Thinking of buying a GIC? Here are five things to know
(NC) You may be looking for ways to invest your money, but are unsure where to start and what the best options are. If you are looking for an investment option that provides a guaranteed return, a Guaranteed Investment Certificate (GIC) may be a good choice. When you purchase a GIC, you are loaning money to the financial institution that issues it for a specific amount of time. In return, you’re guaranteed an interest rate for the investment’s term, and the repayment of your initial investment at the end of the term. It’s a low-risk financial product, making it a popular choice for those who are willing to lock-in on the investment. Here are five things to know about GICs:
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You can buy them directly from the issuing financial institution, or through a broker or investment advisor.
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A big advantage is that they are eligible for deposit protection through organizations like the Canada Deposit Insurance Corporation (CDIC). When purchased through a member institution, GICs are eligible for insurance, should the institution fail. If you want to find out how coverage works, you can try their online calculator.
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When purchasing a GIC, typically your investment is locked in for the duration of the term. For example, if you put $3,000 into a five-year GIC, that $3,000 is locked in until the five years are up.
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They can have fixed or variable interest rates. The time frame for when the interest will be paid depends on the product, but it could be monthly, annually, or at the end of the term (at maturity).
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GICs can be deposited in many types of accounts like a Tax-Free Savings Account (TFSA), First Home Savings Account (FHSA), Registered Retirement Savings Plan (RRSP), or a savings account and can be held in brokerage accounts.
Knowing and understanding how your savings are protected brings peace of mind. Before purchasing any financial product, it’s always good to speak with your financial institution or broker and read the product information to understand the terms.
You can also learn more about protecting your GIC at CDIC.ca.
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