5 Reasons To Buy A GIC

Consider purchasing a GIC as a special kind of deposit you make to your bank. Why would you do this? Because these types of deposits, called Guaranteed Investment Certificates, offer some notable benefits on the usual savings-interest deposit arrangements.

For one, you don’t pay any fees, and GICs will pay out a fixed interest rate over a pre-set time, such as six months up to 1, 2, 5, or 10 years. These interest rates can vary for some GI C plans, which will be based on how a stock index exchange benchmark performs. Basically, the longer your GIC term, the higher interest rate you will get. However, there’s a catch – unlike conventional deposit funds, if you withdraw your GIC money before the end of the term, you will have to pay a penalty, unless you can get a specific type of GIC that allows this without penalty. These no-penalty GICs, called cashable GICs, will also offer lower interest rates. This is a decision – cashable or non-cashable – that you’ll need to make before signing up for a GIC, so make sure you know whether you’ll be needing access to the money in the future. GICs sound pretty good to a lot of people for some very good reasons. Check out these five good reasons to buy a GIC today.

A guaranteed return on your GIC investment Your basic GIC will bring you a guaranteed return on your investment. If you buy a non-market-inked GIC, and hold it for a long term without cashing it out, you’ll get a reliable return and a high interest rate.

Your principle investment is guaranteed Unlike other investment vehicles, with GICs there is zero risk that your principle investment will run into trouble and not be returned to you. For those who view investing in the stock market as something as a gamble, a GIC offers a safe refuge for your money – a refuse that will also grow your money. Though the return won’t be as high as a health stock market investment index, you’re guaranteed not to lose your money.

They’re compatible with registered accounts This means that your GIC can be bought for a registered account such as an RRSP or TFSA. These savings vehicles are good places to stick your GIC. But why? For RRSPs and RESPs, you won’t pay any tax on the interest earned while your GIC is held in these investment vehicles. Same goes for TFCSA – when you do finish your GIC term, gaining the interest, you won’t be facing the taxman to pay capital gains on your investment growth.

Putting money where you can’t easily spend it Sometimes it’s best if we have our investments kept at arms-length. This prevents us from using these funds like a regular day-to-day savings account. In case of emergency, you may still be able to withdraw your GIC, but there will be a penalty.

GICs complement a fixed-income portfolio GICs are a great investment to add balance to a fixed income financial portfolio. Along with a mix of equities, fixed-income financial products like GIC let you safely grow your income at rates higher than bonds. Whether you’re saving for a short-term goal like a summer vacation in Europe or a long-term goal like a down payment for a new mortgage, GICs are an excellent choice

Author Bio: I am Eric Jones, a businessman by profession. Business and entrepreneurship are my passion and I love researching on the various aspects of those areas. I make sure that I don’t miss out any updates and for this reason I read quite a lot. Law is yet another area which I am passionate to know more about.