Should you consider investing in GICs?

Michael Callahan, CFP, CIM
Guaranteed Investment Certificates, or GICs for short, have surged in popularity lately. Recent increases in interest rates have boosted GIC rates, making them an attractive option for investors seeking refuge from volatile stock and bond markets. Indeed, Canadian fund flows indicate a record $1.7 billion flowed into cash alternatives in the month of September alone. Should you consider GICs for your investment portfolio? Let's take a closer look.
GICs are short-term savings products issued by institutions such as banks, trust companies, and credit unions. It may be helpful to think of a GIC as an 'I owe you' – you loan an institution a sum of money for a specified period, and in return, the institution pays you a specified rate of interest and returns your original principal on the stated maturity date. GICs are considered short-term products as they typically have holding periods between one to five years.
Some key advantages of GICs include:
Some key disadvantages of GICs include:
Bottom Line
Principal protection and insulation from market volatility make GICs very attractive to some investors. However, while volatility is most definitely a risk, it’s not the only risk. When it comes to investing, different investment products and strategies can present any number of associated risks. Depending on your individual circumstances, goals, time horizon, and tolerance for risk, GICs may or may not be appropriate for you. To find out more, contact your Edward Jones advisor today.
Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation.