What are the different types of GICs?

Forum Value Personal Finances What are the different types of GICs?

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    Papa Bear

    What types of GICs are there? Which is the best one to get? Please tell me a bit more about GICs and what I need to know to make a good, profitable investment.



    OK! Here are some quick facts:

    1.) It’s called a Guaranteed Investment Certificate. It basically guarantees a certain rate of return when you invest in it for a specific period.

    2.) Canadian banks are not the only ones that offer this. Trust companies also offer GICs. One thing you need to know is that it is low risk.

    3.) Since there is a low risk involved, your returns will not be big either. Mutual funds, bonds and stocks offer more in terms of returns. However, there is also a greater risk involved.

    4.) Whatever amount you invest in a GIC is generally safe. Let’s say you invested $5,000 for one year, you will still have that $5,000, plus a bit more from interest.


    Papa Bear

    Thanks for the quick facts! Sums it up quite nicely!



    There is something called a fixed rate and another one known as a variable rate. With a fixed rate, you can easily tell how much you will get for a specified period.

    Let’s just say you invested a certain amount for 1 year at a fixed rate. At the end of the year, you will get back a certain amount because the interest rate does not change. A variable rate changes. This is dependent on how the stock market is doing. With a variable rate, you won’t know how much you will get back.

    The interest rate is higher with a variable rate than a fixed rate. This is because there is a greater risk attached to it. The one good thing, whether you go with a fixed or variable rate is that your initial investment is not lost. If you invested 10 grand, at the end of the specified period, your 10 grand is still there.



    There is a redeemable and non-redeemable GIC. A redeemable GIC allows you to take out some or all of your investment with no penalty.

    A non-redeemable one means you cannot touch it. Well, you can, but you will have to pay a penalty for taking it. The interest you’ve earned is also forfeited. Unless it is absolutely necessary, do not take out any money from a non-redeemable GIC.

    You should get in touch with someone like Omnia Direct and get proper information on all of this. They actually offer services online, which is really convenient. It is a division of WCFU Credit Union, which is one of the biggest credit unions in Ontario. I believe you need to live or work in Ontario, but please check for yourself.



    I think most people don’t know that you can invest in a foreign currency too. You need to ask your bank, as this is not offered by all banks.

    Generally, investing in U.S. dollars is a good idea, especially when the Canadian dollar goes through a bad patch, which it did not too long ago, if memory serves me well.

    The interest earned will also be in U.S. dollars and it may be worth it to look more into this option.

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