Are you interested in buying a GIC? Then you’ve come to the right place. Buying guaranteed investment certificates (GICs) has never been easier. Thanks to the advent of online banking and investment brokerages popping up everywhere, you can buy a GIC in as little as minutes. We break down the process of purchasing GICs below.
How to buy a GIC
A step-by-step guide to purchasing GICs is below:
- When purchasing a GIC, the first decision you need to make is the amount of money you want and can afford to invest and the time period you want to invest. GIC term lengths are also important. The term you choose affects the interest rate (the more time you invest your money for, the better the interest rate). If you choose to cash out early, you may pay a hefty penalty. Therefore, all investors should think carefully about the length of time they can afford not to touch their investment.
- The second step is to decide which type of GIC to purchase. There are GICs to suit a wide range of financial goals. Fixed-rate GICs, variable-rate GICs, market-linked GICs, redeemable GICs, and cashable GICs are just a few of the most common types. Do some research into each to determine which kind is right for you.
- Next, it’s time to shop around. Once you’ve settled on your preferred type of GIC, term length, and investment amount, compare the GICs being offered by various financial institutions to find the most competitive rate with the best terms.
- Finally, it’s time to purchase a GIC! Many GICs can be purchased online through your banking institution’s website. After you deposit the funds into your GIC account, you’re officially an investor.
Why buy a GIC?
Investors choose GICs for a variety of reasons. Stability, security, a guaranteed return on your principal, and a built-in insurance policy are just a few benefits that come with GICs. Below are even more reasons why consumers buy GICs.
- GICs can diversify your portfolio: Any financial planner will tell you that diversification is key to a healthy portfolio. That’s exactly what GICs offer. If you’ve already invested in stocks, mutual funds, bonds, exchange-traded funds, or real estate, then investing in a GIC is the perfect way to balance your portfolio. With fixed-rate GICs, you’re always guaranteed a return on your investment, even if the stock market takes a turn for the worst. Therefore, investing in a GIC can mitigate the damage done to your overall portfolio.
- GICs are low risk: At the very minimum, GICs guarantee your principal investment. This makes them incredibly attractive investment opportunities, especially to risk-averse investors. Even better, if you invest in a fixed-rate GIC, you are guaranteed a return on your investment according to the agreed-upon interest rate.
- GICs are often protected by the Canada Deposit Insurance Corporation (CDIC): Making GICs even safer is the fact that many are backed by the CDIC. If your GIC is covered by the CDIC and your bank fails, you’ll have recourse to get the money you’re owed (up to $100,000). Certain exceptions apply. For example, CDIC coverage is not offered on foreign GICs (such as one based in the United States), GICs with a term of more than ten years, or a GIC purchased from a private corporation that is not a member of the CDIC.