Guaranteed Investment Certificates

Guaranteed investment certificates are issued by a bank or any other financial institution. These investments have a term that varies from one to five years. The certificates are issued in the name of the investor and are not negotiable. They can only be sold to the issuer.

With this category of investment, the client invests an amount for a fixed period. An interest rate is fixed at issue and remains the same for the duration of the certificate.

It is possible to invest in a guaranteed investment certificate at compound interest: the interest is added to the capital and the future interest is calculated on this amount. If needed, you can dispose of your GIC before maturity, but a penalty will be charged: GICs are not redeemable before maturity but transferable at the market price.

Risk Level

Guaranteed investment certificates are sure investments. However, if you make use of your money before the certificate matures, you risk losing a portion of your capital and interest. This reduces the return on your investment.

There is also a risk of missing certain other opportunities that could be more profitable than GICs. Since you are locking-in your funds for a certain number of years, if the interest rates go up, you will not be able to take advantage of them.

This type of investment is ideal for people with low risk tolerance and who favour security over higher returns.