Is a Guaranteed Investment Certificate the right investment vehicle for you? Read this article to learn more about this investment option and its benefits.
A Guaranteed Investment Certificate (GIC) has a guaranteed rate of return on the investment over a specified period of time. Since there are comparatively lower risks involved in a GIC, the rate of return is smaller than mutual funds, bonds and stocks. You will usually find this option with trust companies or banks. The safety and security feature of a GIC makes it the first choice amongst many Canadians.
With a GIC, you will have the freedom to decide the amount of money you want to invest over a specific period of time, with the time-frame dictated by the GIC you select. The time period for the investment can vary from a few months to over 10 years. Obviously, long-term investments will attract more interest, and the short-term investments will fetch lesser Interest Rates. At the time of maturity, you are returned the invested money, plus the interest you have earned on that amount.
With some Guaranteed Investment Certificates, you are not allowed to have access to the invested money before its maturity. In comparison, with other Guaranteed Investment Certificate, you can access the money before the investment term ends. Your Financial Advisor is a better judge for choosing the right type of GIC for you, depending upon the availability of funds and time. In some cases, you can even add money on monthly, biweekly, or weekly basis to the initial cash invested.
There are different types of Guaranteed Investment Certificates available. To be more specific, let’s discuss the Redeemable and Non-redeemable GICs:
When the investor is allowed to access the invested sum throughout investment term, it is known as Redeemable. With a Redeemable GIC, you get the freedom to withdraw the invested amount before the term ends. This might result into lower interest rates, but not always.
In comparison, Non-redeemable GICs don’t allow such freedom. You can’t access the money before maturity, but oftentimes offer higher interest rates.
What are the benefits of Guaranteed Investment Certificate?
As mentioned in the beginning of this article, security and safety is the prime benefit of this investment option. The initial sum of money is protected throughout the term, so you will enjoy the amount you have invested, plus the interest that you have earned on that initial amount upon maturity. Since these are flexible options, you can decide on the amount you want to invest and the term of investment as per your wishes. Guaranteed investment certificates are a great alternative to individuals considering investing their money in a High Interest Savings Account.
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