We’ve all seen the rollercoaster ride of financial markets over the past year as traders have priced in and tried to guess the Bank of Canada’s next move. Market fluctuations have given retirement savers some sleepless nights.
As the BoC’s Key Rate climbed, the upside of higher interest rates has meant that GICs once again received star-power attention. Right now, savers can get the “safety” of non-redeemable, long term, non-registered GICs with a return of 4% or even more.
THERE ARE 3 PRIMARY TYPES OF GICs
Fixed rate GICs – money’s invested with a financial institution for a specific term, some redeemable before maturity, some not. No guess, no stress.
Variable rate GICs – offer rates that may change over the term of the GIC. The rate is dependent on a fluctuating interest rate benchmark, usually the financial institution’s Prime Rate. This type of GIC may be attractive today, however, if rates begin to dip, they may
lose some of their shine.
Market or equity-linked GICs – offer a return based on the performance of an underlying stock market index. With these GICs, your rate of return is not determined until maturity. If the market doesn’t perform well, there may be little or no return – other than the principal amount, which in this type of GIC should be guaranteed.