Guaranteed Investment Certificate is one of the simplest and risk-free ways to invest your hard earned money. You will be sure of what you will be getting out of your investment. It is one of the biggest advantages that you have in GICs. It helps a lot in making calculated future plans.
Just because GIC is safe and advantageous it does mean that you can blindly invest in it. There are a lot of things that you need to consider before purchasing a GIC. In this article, we will see in detail the important things that you need to consider before buying GICS.
Choosing the right term
The most important thing that you need to consider is the term of the GIC that you are choosing. When it comes to terms, the first thing that you need to know is that the term that you are choosing will directly impact the interest rates. The longer term will have higher interest rates, and short terms will have less interest rate. The interest rates and the terms are directly proportional to each other. Before choosing the terms, make sure that you will able to afford to make the deposits. There are three different GICs when it comes to terms. They are
The short term GICs are the ones that have a deposit term of one month (thirty days) to one year (364 days). If you are looking to get a higher interest rate when compared to a saving account, short term GIC is definitely one of the best options out there.
The long term GICs are the ones that have the deposit period of one to five years. It is one of the investments that have a very high interest rate. This is the best option for people who have big plans in the future, like buying a house.
The Gic rates in cashable GICs are based on a one-year term. The cash can be withdrawn after the first thirty days of deposit, which is not the case for the rest of the plans. You get the entire principle with interest gained out of it.
Choosing the right type
There are different GICs that offered by the banks, and different GICs will have different rules. Make sure that that you read the rules and regulations before you sign up for GIC investment plan. Most of GICs are non-cashable and non-redeemable. It means the money cannot be withdrawn until the end of the term. There are some GICs that are simple cash investments that are linked with the stock market. These kinds of GICs there no confirmed returns because it deals with a volatile market.
The interest rates are the next important thing that you need to pay more attention. The interest rates will differ from one plan to another. The longer terms will have higher interest rates, and short terms will have less interest rates. The interest rates can vary from 2.70 percent to 3.15 percent depending on the term and types of GIC.