What is a GIC?

A GIC (Guaranteed Investment Certificate) is exactly what it promises – a guaranteed investment. When you buy a GIC, you invest a sum of money for a specific term (period of time). At the end of that term, you are guaranteed to receive your full principal (your initial investment) plus all interest income received on your money.GICs are an important part of every investor’s portfolio because of the security they offer. They produce steadier returns over time than other forms of investments and provide risk-free gains due to the fixed amount of interest that is earned on the capital. Perfect for conservative investors, GICs provide a secure way to save for short-term goals, like a vacation, or for long-term plans, like buying a house or retirement.

Cashable vs. Non-Cashable

Cashable GICs offer flexibility because they allow the investor to access their money before the GIC’s maturity date. This is convenient if you need that money sooner than expected. Non-cashable GICs must be held until maturity, but generally return a higher interest rate once collected.

Who Should Buy a GIC?

With a large range of GICs to choose from, they are suitable for all types of investors – from riskier investors looking for high return and rapid growth, to investors seeking guaranteed returns over staggered or fixed periods of time. Most portfolios should include some proportion of GICs to balance the more aggressive investments you may have.

Registered vs. Non-Registered

Holding GICs inside a registered investment account, such as an RRSP, RRIF or RESP, offers the investor the benefits of a tax shelter. This allows your investments to grow faster because you do not pay any tax until the GICs are withdrawn.

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