How to Choose the right GIC?

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As you are preparing for your financial future, there will be many different investment opportunities that you can choose from. One type of investment to consider is a Guaranteed Investment Certificate, or GIC. These investment options will provide you with a guaranteed rate of return with extremely little risk. As you are looking for a GIC, you will find that they are offered by a variety of different financial institutions and the options at your disposal do vary. There are several tips that you can follow that can help you to choose the right GIC for your situation.

Consider the Term

The term of a GIC is a very important factor to take into consideration. In some situations, you will not be able to withdraw your money without penalty until the term of the GIC is up. The term of these investments can range considerably and typically will vary between just a few months and five years. Because of this, you should pick an investment option that has a term that will not lock in your money for longer than you want. 

Interest Rate

Another important factor to consider when shopping for a GIC is the interest rate. Similar to any type of investment account, you will want to get the best rate that you can on a GIC. The rate that you receive will vary a lot from one GIC to the next and can fluctuate based on the term, the amount that you deposit, and the financial institution that provides you with the GIC. You can normally maximize your return by shopping around or setting up a GIC ladder.

Withdrawal Penalties

GIC accounts are a little bit different from savings accounts because you are entering into a contract that will require you to hold your money for a certain period of time. While you may technically be able to withdraw your money at anytime, you still may need to pay a penalty to do so. It is important to understand what the penalty will be and when it can be avoided. There are also redeemable and cashable GIC accounts that do not have fees, but the interest rate may end up being much lower in exchange for this flexibility.

Minimum Deposits

You should also keep in mind that some GIC accounts have different deposit minimums than others. While some banks may offer accounts that start with minimum deposits of just $100, others could require a much more sizable deposit. Generally, those that have more money to deposit into an account will end up getting a larger interest rate and could see more appreciation over the term of the GIC.A GIC is a great investment vehicle for anyone that wants a low-risk investment that still provides a decent return. However, you may find it challenging to pick a GIC to put your money into. If you follow these tips, it will help you to find the right GIC for your personal situation and making the right investment.

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