Financial Investments in Canada: GICs

Guaranteed Investment Certificates are secure investments and as the name says, they are guaranteed. Your money is preserved and earns a predictable return that’s based on current interest rates and the time period you choose.

Here are some of the various kinds of GICs you can invest in:

1. Short and long-term GICs
   can range from one day to ten years. Generally the longer you invest, the higher your rate of interest.
2. Market-linked GICs
   are based on the performance of various stock market indices. Your principal is guaranteed but you won’t know your actual return until time of maturity. You have the benefits of diversification and a higher potential return without risking your original investment.
3. Interest-linked GICs
   offer a variable rate of return during their term. As interest rates fluctuate, so do the rates on these GICs, allowing you to continue earning more as rates increase.
4. Specialty GICs
   are designed to meet specific investing needs. There is a wide variety available, for example, GICs that allow you to contribute through a monthly contribution plan.
5. Cashable or Redeemable GICs
   can give you the flexibility of accessing your money before the end of the term, without any penalties. These can also be called flexible GICs.
6. Non-redeemable GICs
   may pay a higher rate of return but are not redeemable prior to maturity except in exceptional circumstances.
7. Laddering
   A popular GIC strategy Laddering, or staggering maturity dates, allows you to smooth out rate fluctuations, increase your potential returns and ensures you always have easy access to your money.

The strategy is to divide your principal and invest it in a combination of short-and long-term GICs with staggered maturity dates. A common choice is to invest in 5 GICs, with terms ranging from one to five-years. When the most current GIC matures, you can decide whether to cash in your principal or to re-invest in a five-year term GIC.

This is a great way to take advantage of the best rates, and have consistent long-term investment growth. Using this approach, it's easy to customize your ladder to meet your specific needs and timing.

Because laddering has become so popular, special GICs have been created which ladder your investment for you. You get the same result but you don't need to manage and track separate GICs yourself.