Tag Archives: Guaranteed Investment Certificates

New Equity-linked GICs offer equity twist on humble GIC

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By Rachel Megitt, Vice President,

Term Investments & Savings, RBC

(Sponsor Content)

If you’re looking to grow your money, the future looks a lot different than it did even a few months ago, given the current volatility in the markets and intensifying inflation.

We often hear the adage “big risk equals big reward,” but what if you want the reward but aren’t comfortable taking the risk? This is where a new twist on a traditional investment is proving to be a powerful option: equity-linked GICs (Guaranteed Investment Certificates).

In the summer of 2021, we shook up our product line-up and added two new equity-linked GICs that also represented RBC firsts and proudly shared the news, including in a Findependence blog.

New GICs with an equity twist

Within the first six months, we saw client enthusiasm about these two new “GICs with an equity twist” surge well beyond our expectations. Our clients have been clamouring for these GIC options and we believe this reflects the overall desire of Canadian investors to tap into what equity-linked GICs provide: the appealing combination of a guarantee for their initial investment, plus the higher return potential that comes with an equity investment.

While we knew we had created two truly compelling and competitive GICs, we never imagined how strongly these new GICs would resonate across the country. The buzz surrounding these equity-linked options is helping reshape investment conversations in Canada. These GICs offer investors who are reluctant to buy individual equities the opportunity to step into the world of equity investing at both a pace and level of risk they are comfortable with. Continue Reading…

The (Renewed) Case for GICs

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**This is a sponsored post written by me [Robb Engen] on behalf of EQ Bank. However, as always, all opinions are my own.

A guaranteed investment certificate (GIC) is unlikely to spark an exciting dinner party conversation but when stock markets are reeling, like they were earlier this year, investors often seek safe havens to wait out the storm. Cash is king for those who don’t have the stomach to watch their portfolio plunge in value, and GICs at least offer the promise of a modest return.

Back in February 2009, when the global financial crisis had just about reached rock-bottom, 30-year-old me was scrambling to meet the RRSP deadline and bought a five-year GIC. It was a costly mistake in hindsight. The Toronto Stock Exchange surged ahead for the next five years, earning annual returns of 9.52 per cent, while my five-year GIC earned an average annual return of 2.75 per cent.

Instead of turning my $7,000 contribution into nearly $10,000, I only had $7,800 to show for my decision. At the time, though, I thought the GIC was a smart move because I had to make a quick decision on what to do with my contribution, and the stock market still looked downright nasty.

Why invest in GICs?

The truth is there’s nothing wrong with stashing your savings inside the comfort of a GIC. Here are four times when it makes good sense to put your money in GICs:

1.) When your entire portfolio is sitting in cash, waiting for “the right time” to get into the market

If you’re the type of investor who can’t ignore the doom-and-gloom economic headlines, and who’s convinced that a market meltdown is always imminent, maybe the stock market isn’t right for you.

Having your retirement savings constantly sitting in cash and earning nothing is like sitting on the fence and being paralyzed to move for fear of making the wrong decision at the wrong time.

A GIC ladder, which might involve purchasing equal amounts of one, two, three, four, and five-year terms, will maximize your risk-free returns and still give you the option of dipping your toes in the market each year when one of the terms comes due.

2.) When your investing strategy boils down to chasing last year’s winning stocks or mutual funds

If you’re the type of investor who’s constantly looking for the latest fad, you might be falling victim to the behaviour gap – the difference between investment returns and investor returns.

Consider that, according to DALBAR, from 1986 to 2016 the S&P 500 Index averaged 10.16   a year, but the average equity fund investor earned just 3.98   a year.

When you think about our poor investor behaviour, coupled with sky-high mutual fund fees (at least, here in Canada), those investors who just can’t help themselves might be better off parking their savings in the best five-year GIC and earning a guaranteed return. Continue Reading…