Some Basic Information About GIC Rates
A Guraranteed Investment Certificate or GIC for short is an investment that is based in Canada and is generally issued through banks, unions, and even trust companies. This investment will, like others, offer you a guaranteed rate of return over a certain period of time. The GIC rates are determined by the bank when you initially set up your account.
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.
So how do these investment certificates work? Just the same as most other investments, with a GIC, you will choose a rate and then determine the amount of money over what period of time that you want to invest.
When these certificates reach their due date, it is known in the investment world as its maturity date. When you choose this type of investment you need be sure that you understand all of the terms and conditions that are specified by the particular institution.
Another thing to be aware of with these types of certificates is that you will need to invest a minimum amount of money, usually in the neighborhood of at least $500. Once your investment has reached maturity you will receive the interest that has accrued over the time period of the investment. Consequently, the less time that you invest your money for, the less interest you will ultimately receive on the back end.
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.
Of course, if the stock makes big gains than you will earn a greater amount of interest. But, the opposite is true if there is a stock loss. Another thing to keep in mind with these low-risk investments is that over a period of three years you will only receive a maximum of a 25% return of interest.
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.
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