GICs offer more options than you think
 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:
Short and long-term. GICs can
range from one day to ten years. Generally the longer you
invest, the higher your rate of interest.
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.
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.
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.
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.
Non-redeemable GICs may pay
a higher rate of return but are not redeemable prior to maturity
except in exceptional circumstances.
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.
If you’d like more information on GICs and how they
should fit into your portfolio, click
here to find the RBC financial planning professional closest
to you.
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