Everything You Want To Know About GIC Canada Rate
GIC Canada Rate stands for guaranteed investment certificate, which is a popular type of investment in Canada. The best thing about this investment is that investors get a guaranteed rate of return over a certain period of time. The rate is fixed in the beginning – at the time you are making the investment. For example, you might be promised a return of two percent if you invest for three years. GIC rates do not change with the changing market conditions. No matter how the market behaves at the time of the return, you will get what you are promised. Because of this special feature of the GIC Canada rate, this type of investment has gained rapid popularity in the banking industry in Canada.
A Better Option Than Investing In Stocks Or Bonds
It is true that investing in stocks or bonds can lead to a much larger returns, but the investors have to take risks there. The return is not guaranteed as things change very quickly depending upon the varying conditions in the market. If the market is up, you can make big money, but if the market is down, you may have to suffer big losses as well. There are no such risks associated with guaranteed investment certificates. Whatever the rate is, it is not going to change throughout the life term of your investment. If you have invested for three years, the GIC Canada rates are going to be the same for three years. This way, stocks and bonds are high-risk investments but GIC is a no-risk investment.
Factors That Determine The GIC Rate
There are several factors that are taken into account to determine the GIC Canada Rate. Some important factors include the length of time you are making the investment for and the type of the certificate you are investing in. The longer the investment period is, the higher the rates are. For example, if you invest for ten years instead of three, you are very much likely to be offered a significantly much higher rate. You can generally invest in GIC for a minimum period of six months while the maximum ceiling is ten years. It is up to the investor to decide how long a period they want to invest for. Another important factor that influences the GIC rates is the interest rate specified by the Bank of Canada (the central bank of the country). This interest rate has heavy influence on GIC return, and there is no way to change the rate once specified by the BOC.
How Does It Work?
When you invest in a guaranteed investment certificate from a financial institution, you actually lend a certain amount of money to them for a specific period of time. Once the GIC matures, it is up to you to decide whether you want to renew the investment for another period of time or just want to cash it in. You have to sign a contract with the financial institution when you buy this type of investment certificate. The contract explains all the terms and conditions that will be applicable for your investment, such as the period of time, the amount of money you are investing, the type of certificate, and the GIC Canada rates you have been promised. The institution you buy the GIC from invests your money to other bigger financial groups. No matter how much profit or loss they make from their investment, they are liable to pay the returns to you as per the GIC rates promised in the contract.
Options Other Than The Standard GIC
Besides the standard GIC, where the rates are fixed, there are some other options also that the investors may like to go for. For example, you can invest in stock-indexed or market growth guaranteed investment certificate, where the rates may change depending upon the growth of a specific stock in the market. As compared to the standard GIC, this type of investment carries risks. Though the risk is not very high, but it is there. You can expect huge returns if the stock makes big gains. But, in case the stock does not make any profit and goes in loss, you will not get any return. Another negative aspect about this low-risk GIC is that you cannot earn more than point twenty five percent (.25%) return in a period of 3 years – regardless of how big gains the stock is making.
Depending upon the GIC Canada rates promised to you on your investments, the returns might be paid to you on a monthly, quarterly, half-yearly, or yearly basis.