What Does it Mean to Invest in a Guaranteed Investment Certificate?

Find out what investing in a GIC could mean for you. There are some important things to note when dealing with this particular form of investment and this article explains some of them.
If you want to make a lot of money quickly and aren’t worried about risk GICs are likely not right for you. Investors looking for huge returns in a short period of time should probably invest in industry specific stocks like gold production stocks. However, with a higher rate of return comes a greater amount of volatility. So if you are looking to nurture your existing nest egg over time a GIC could be the right choice for you.
Buying a GIC requires an initial deposit of at least $500 but rates vary depending on the investment terms. They are typically purchased with the intent being a long-term investment not unlike money market funds. Investment terms range from one day to 10 years, and interest payments are made either monthly or annually. The rate and percentage of return depends on the kind of GIC one acquires.
There are different kinds of GICs though the two most common are known as Regular GICs and Market Growth GICs. While a Canadian financial advisor can get into the details, there are some basic facts about the different types of GICs. With the Regular GICs, the bank or trust agrees to a fixed interest rate on an investment for a decided number of years. Though the rate is less than 10%, the returns add up over time. This is why Regular GICs are usually best for long-term investments. Market Growth GICs are whole new ballpark. In this case, the rate of return depends entirely on the stock market average. For example, between 1997 and 1999, NASDAQ went up by 55% or from 1502.62 to 2706.18 points. Thus, individuals who bought Market Growth GICs as a two-year investment in 1997 will see their rate of return become 55%. Investing in Market Growth GICs is similar to investing in stocks except that in the case of the former, the person is investing in the market as a whole opposed to a certain company. You are betting on the value of NASDAQ, not on a specific company.
Overall, a Guaranteed Investment Certificate is an excellent opportunity for investors looking for a stable rate of return.