4 Important Aspects of GIC That You Should Know


The GIC Canada rate has helped stand for your guaranteed investment certificate, a very popular kind of investment we have in Canada. With this type of investment, you, as the investor, are assured of some rate of return within a certain time frame. At the beginning, the point which you are investing, the rate is usually fixed. You need to know that changing market conditions never affect GIC rates. For this reason, you are guaranteed to get what was promised to you. The Canadian banking industry, particularly adapted the GIC Canada rate due to this special feature.

  1. A better option than investing in stocks or bonds

You are most likely going to get a much higher return when you invest in bonds and stocks, and that is a fact. However, as an investor, you will be taking too much risk that you may want to avoid altogether with the rapid changes that occur in the market. You will either make big money if the market goes up or end up suffering great losses if the market goes down. With guaranteed investment certificates, you will never encounter such risks. The rate will never change, whatever it is, throughout the period you invest with GIC. Stocks and bonds will be a high-risk investment for you, while the GIC investment will be of no risk at all.

  1. Factors that determine the GIC rate

Dozens of factors are considered when determining the GIC Canada rate. Some of the vital factors are; the type of certificate that you are investing in, and the duration that you plan on making your investment. This is how it works, the longer the period you plan on investing, the higher the rates on your investment will be. To elaborate further, you are more likely going to receive a higher interest rate if you invest for ten years that if you invest for three years. The minimum period you can invest is six months, while the maximum period is ten years. The Bank of Canada greatly influences the GIC rates. You cannot change the rates once the Bank of Canada has set them.

  1. How does it work?

To invest in GIC from a financial institute, you will have to be lending them some specified amount of your cash for a specified time frame. And once it matures, the decision lies with you whether you want to have your investment renewed or you plan on cashing it in. Of course, there is a contract that you will have to read the terms of your agreement for the investment and sign it. What the GIC group you invest with does is that they also invest your money in other financial groups. You need to know that they are obligated, however, to pay you all the returns you agreed to in your contract whether they make profits or losses on their investments.

  1. Options other than the standard GIC

Other than the standard GIC, there are other options as well that you, as an investor, may want to look into. You can invest in market growth or stock-indexed guaranteed investment certificate. With these types of investments, your rates may change with the growth of some stocks in the market. These investment types carry risks as opposed to the GIC investment, even though these risks may not be as high as those of stocks and bonds. Depending on the contract you signed, and the promised GIC Canada rates, you may get your returns on a monthly, quarterly, or yearly basis.