6 Frequently Asked Questions About GICs (Guaranteed Investment Certificates)

When it comes to understanding GICs you will probably have a lot of questions that need to be answered. These can range from basic straightforward questions to more complex ones. We’ve put together some of the most common questions that new investors have in regard to GIC investments.

1. What are the two types of GICs?

There are two types of GICs, traditional GICs and market-indexed GICs:

Traditional GICs are also categorised as fixed-income investments. This is because they have a fixed maturity date along with a fixed interest rate. This can give a feeling of confidence in the investment as there is a known time frame and a rate of return that you can plan your life around. This is one of the main reasons what traditional GICs are so popular.

Market-indexed GICs have a different sort of guarantee. They ensure the repayment of the invested capital, but the interest earned is dependant on the performance of an underlying index or benchmark over the term to maturity.

2. When buying a traditional GIC, what options do I have?

There are a few options that investors can choose from. Each have their own benefits and have specific terms on how and when you can access the principle and the return. So that you are fully informed you should take the time to speak with a professional investment advisor so that they can guide you to the right GIC for you.

Getting the opportunity to speak with an expert about GICs and how investing in them can help you to meet your financial goals can go a long way to ensuring that you make the right choice. You should come to this meeting armed with a list of questions that you have about GICs and how much you are able to invest and what timeframes that you need to be seeing a return.

3. What are the income payment options available for traditional GICs?

As an investor, you will have options such as annual interest, monthly, quarterly and so on.  The annual interest option is paid out on the anniversary of the initial investment. Annual compound interest options are available but you should make sure that you understand the maturity date and that you are prepared to wait that long to see a return.

4. When is the right time to use GICs?

If you are looking at your savings and decide that you want to dedicate some of it to a fixed income asset then a GIC should be on your shortlist. There are many benefits to choosing a long-term 4 year GIC as their features, interest rates, terms to maturity, ability to possibly access the principal before maturity, allow for some very enticing possibilities.

5. Do I need to be an expert investor?

No, you do not, but you should make sure that you have an expert in GICs discuss your options with you in advance of any investment. You can rely on their skills and experience to guide you as you build out a profitable investment portfolio for you. You should, of course, make every effort to do your research on GICs and ensure that you have a solid understanding of exactly what type of GIC that you’re investing in and that the dates that you will see a return on your investment are clear.

6. Is there a minimum or a maximum that I need to invest?

This will depend entirely on the type of GIC that you choose to invest in. You should note that the more that you invest, the greater the rewards will be.