What are GIC rates? Well first of all, a Guaranteed Investment Certificate or GIC as it is commonly known in investor circles, is a type of Canadian investment that guarantees a certain rate of return in a certain amount of time. This is considered a low risk type of investment while other financial products such as stocks and bonds are considered a higher risk.
Most investors like to add these certificates to their portfolio because they are considered a low risk investment. However, because of their lower risk factor they are more likely to receive a lower return than some of other types of investments including mutual funds, and stocks. Mutual funds and stocks and bonds are considered to be a higher risk investment because of the volatile market, similar to how variable mortgage rates can fluctuate as well.
When you purchase one of these certificates from one of the above-mentioned financial institutions they will actually pay you to borrow your money for a certain period of time. This period can be anywhere from 6 months to 10 years.
When it comes to the terms of the GIC rates that are used, the overall percentage is generally dependent upon the type of certificate and also the length of time that you have invested it for. The length of time that you can invest your certificate can be anywhere from 6 months to ten years. It all depends on your personal choice and particular needs.
Another factor that will determine the interest rate that you will receive is the interest rate that has been officially set by the Bank of Canada. By no means can these rates be altered and as a result you are “guaranteed” to earn at least a certain amount of money for the term of your investment.
There are basically two types of certificates: redeemable or unredeemable. The redeemable certificates are those that you are able to redeem before their overall maturity rate. The certificates that allow you to get an early withdrawal will often stipulate that you will have to pay a penalty if you wish to cash out before it reaches maturity. The unredeemable certificates will not allow for early withdrawal at all; you must wait until the certificate has reached its maturity rate. But again, to receive the most financial benefit, as far as higher interest earnings and therefore higher return, the best choice would be to use an unredeemable certificate if you can. This option is a popular savings choice when planning for a large purchase such as a house or car.
GICs are generally known to offer some great interest rates. Of course, the biggest benefit that a GIC offers is security. The amount of initial cash that you invest is safe. With a fixed rate you will also be guaranteed growth and an easy way for you to project the value at the time of maturity. But, ultimately, it is nice to have the flexibility in terms of the various plans offered.
So, if you live in Canada you should really consider giving the GIC investments a try. This is just about the safest way for anyone looking to build a strong investment portfolio to help them with achieving their financial goals.
Before shopping for a home, compare the different mortgage rates that are being offered. It would be wise to move your funds into safe investments in the meantime, as guaranteed GIC rates can give you peace of mind.