The
ABCs of GICs
Author:
News Canada
(NC)—In
years past, guaranteed investment certificates (GICs) have been regarded
as "plain vanilla" investments. GICs in fact suit the needs of
all investors — from those who are security conscious to those who have
a more aggressive investment approach.
"Investors
of every profile should consider including GICs into their portfolio mix,"
says Julie Sheen, Vice-President, BMO Term Investments. "They preserve
the safety of the initial investment and depending on the type chosen, can
offer stable interest rate returns and growth potential."
There
are a number of options you should consider before you decide which GIC is
best suited to your needs:
Short-
vs. long-term: GICs can be held either short or long-term, with maturity
dates that range from one day to ten years. Typically, longer-term GICs offer
higher interest rates. However, rate of return should not be your only consideration
factor when choosing a GIC. One-to-five year GICs may be ideal if you are
saving for a defined goal, such as a vehicle purchase, where you have a relatively
good idea as to how long it will be before you will need the funds. Some
GICs offer the benefits of both: short-term options along with interest rates
that are guaranteed to increase over time so that the longer you can invest,
the better. A BMO RateRiser GIC, for example, is one such product that is
built on the premise that the longer you can invest, the greater the rewards
will be as interest rates increase over the term of the investment.
Cashable
vs. non-cashable: If you are looking for flexibility in your investments,
you may want to consider a cashable GIC. These investments give you the option
of accessing your money before the GIC's maturity date. Conversely, non-cashable
GICs must be held until maturity, but they generally reward investors with
a higher interest rate.
Registered
vs. non-registered: Most GICs are eligible to be held inside a registered
investment account, such as an RRSP, RRIF or RESP. Holding GICs within your
registered plan is an ideal way to have your investments grow faster as they
remain tax-sheltered until they are withdrawn.
A
visit with a financial planner at your local bank branch can help you decide
on the best mix of GICs to help you reach your investment goals.
Information
provided by BMO Term Investments. For more information visit your nearest
BMO Bank of Montreal branch, or call 1-888-771-0123 or visit www.bmo.com/gic.
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News Canada
