By Adriana N.

If you are looking to invest your money in a low risk financial instrument, then consider guaranteed investment certificates or GICs. Of course, since they are low risk they are also low return, but not too bad. There are many options to invest your money here. Suffice it to say that the longer you invest your money here, the higher GIC rates you will be entitled to. Of course, like all investments, you should be aware of all the pros and cons and here, we enlist them.

There are many options to consider when putting your money in this instrument. There is the one-year plan, the two-year plan, three-year plan, so on and so forth. Interest is calculated according to the money invested and is payable each year to the investor.

When the plan matures, there is the option of either not continuing the investment or renewing the terms. If you choose not to renew it, the amount could be taxable. Let us now consider if you should invest per year or take a long-term investment and be happy with the returns.


Suppose you invest your money for five years but rates shoot up in between, you will not be entitled to the new rates and will earn based only on the old rates. While many tend to overlook this, there are an equal number of investors who are not happy to lose on better interest rates. How can this be fixed, is the question.

The answer is actually all in the math. Calculate with a decent approximation, the difference in returns from a one-year investment as against a three or five year investment. Try to get a general prediction of where the markets would be headed in subsequent years.

You could come up with a general idea of which scenario would be more profitable for you. This is a suggestion based on speculation; finally, you will have to take the call about how long you want to tie up your funds. Alternatively, ask yourself how urgent do you need the funds back with you.

There are other means to invest money however, GIC is very safe. Yes, returns are not as lucrative as others are, but for the novice investor or the one who does not want to take unnecessary risks, this is as good as any. With the instability in the market today, think about this as a guaranteed source of income within no time.

Are there any disadvantages with investing in GIC? For one, if you plan to cash them before their maturity period, be prepared to pay a penalty for doing so. As a rule, once the money is in, it is in for the entire period. The other disadvantage of general interest rates going up and not being able to take advantage of that with your GIC rates, has been discussed. At the end, this safe instrument is a sure shot earner. One has to be satisfied that there are some returns; or would you rather invest in a high-risk instrument and lose the principal amount anyway?

About the Author: Analysts are expecting mortgage rates to rise and GIC rates to drop within the upcoming year. Read more about it on our blog.


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