Guaranteed Investment Certificates (GICs) (2024)

FAQs

Are GICs 100% guaranteed? ›

A GIC is a secure investment that guarantees 100% of your principal and interest when held to maturity while earning interest at a fixed or variable rate, or based on a specific formula.

The principal investment is secure and can be cashed in full at the end of the GIC term. Calculating return on fixed-rate GICs is relatively straightforward as it's based on the length of the term and the amount deposited. You often receive a higher rate of return on GICs when interest rates are on the rise.

Cons: Low return – GICs are low-risk investments, which means they offer lower returns as opposed to stocks or mutual funds. Limited liquidity – Other than cashable GICs, your money is locked in for a set timeframe, which means you're unable to access your funds should you need them.

Bottom Line. Given Canada's current high-rate environment and the expectation of rate cuts in mid-2024, GICs could be a solid investment for anybody looking to preserve capital and earn a stable return. If you're seeking higher returns, GICs are not the way to go.

Guaranteed Investment Certificates (GICs) and term deposits are secured investments. This means that you get back the amount you invest at the end of your term. The key difference between a GIC and a term deposit is the length of the term. Term deposits generally have shorter terms than GICs.

A guaranteed investment certificate (GIC) is a secure, low-risk investment that guarantees 100% of your original principal while earning annual interest at a fixed or variable rate based on a specific formula.

High-interest savings accounts (HISAs) and guaranteed investment certificates (GICs) are reliable financial tools that can help boost your ability to save. GICs have higher interest rates but typically lock up your funds for months or years, whereas HISAs offer lower rates but much more accessibility.

A guaranteed fund doesn't mean that an investor will always get back the invested capital at maturity. In addition, there are limitations as to how the guarantee applies. In many cases, if the fund manager is removed from managing the fund prior to maturity, the guarantee will no longer be valid.

The risk of not having access to your money

This is why GICs are not usually ideal for long-term savings goals like retirement," Gasper said. "That said, for some people, especially older folks, using a GIC laddering structure puts them at ease.

Bonds may offer potentially higher yields (interest rates) but will fluctuate in value. GICs provide a fixed yield because there is no market in which to sell the GICs. Thus, investors in bonds can see values fluctuate before maturity, while GIC investors will not see these fluctuations.

Are GIC safe in a recession? ›

With a GIC, you're guaranteed to see returns and won't have to worry about the risks of cashing out your investments too early or at the “wrong time” when the market is down.

Whether you should invest in GICs or dividend stocks depends on factors such as your risk appetite, investment horizon, and age. If you aim to hold the investment for less than five years, GICs might seem a better option and vice versa.

To summarize: Canadian bond returns were higher than one-year GICs in 34 of the last 41 years, representing 83% of the time. Bonds had negative returns in only five of the last 41 years: 1994, 1999, 2013, 2021 and 2022.

While fixed-income investors were brutalized in 2022 with unexpected losses even in supposedly safe bond funds, Canadian investors who put some of their fixed-income into GICs were likely spared the carnage. That includes my family, who for the last few years had parked some cash into laddered 2-year GICs.

In Canada, a guaranteed investment certificate (GIC) is a deposit investment product sold by Canadian banks and trust companies. It's considered to be a low-risk investment and offers a guaranteed rate of return over a fixed period, ranging from a few months to several years.

It is true that your principal – the original amount you invested - is guaranteed to be returned to you, when you purchase a GIC. Also, most GICs are insured by the government, in the event of a bank failure.

Cashable or redeemable GICs – You can cash them in early, before the maturity date, without paying a penalty. Regular GICs – You will likely have to pay a charge or penalty for taking your money out early. Even if you only need some of your money, you might have to take it all out.

If you have a redeemable GIC, you can cash in your investment before maturity, subject to certain conditions. If you have a non-redeemable GIC, you'll have to wait until the investment matures.