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Investing your money in GIC

Posted in: Financial News

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Jun 22, 2010 - 12:51:10 AM

Low risk investment

Guaranteed investment certificates are backed by a bank, trust company or insurance company. If you choose the offer of a fixed rate of return projected anywhere from a few months to five years forward. The return is always positive. GIC can work for you at any stage of your life.You can be a good place to put your money that you don’t need to get at risk. If you invest in fixed interest rate, you don’t need to lose any of your principal amount of the investment. You can choose the offer of a variable rate of return during their term. As interest rates fluctuate, therefore the rates on these GICs are allowing you to continue earning more as rates increase.

Still the interest rate of saving accounts are bit low, because of the interest rate fluctuation. Now it’s the time to invest your money in GIC. You need a safe place to invest your short term savings. If you don’t need your money for one month or more, you can get a higher return with a GIC than with a bank account. You should compare how much you’ll get with a high interest rate savings account, before you decide to invest your money, You need a safe place to put your money till you think about how to invest it for the long term. You can put your money in a short-term GIC that pays you interest until you look at investments that can pay more. You want to balance your investment portfolio. If you buy GICs you will have some safe, fixed income investments to balance options like stocks and mutual funds. GICs come in many different elements, each with different options, different maturity dates and different interest rates.

Most investors regularly buy GICs that mature and pay interest on different dates. It will help them to their investment plans. This is called as GIC laddering. You have access to cash at different times, cash that you can either use or reinvestment. If interest rates rise over time, you can be able to access cash to buy GICs that pay the higher rates. If interest rates fall, laddering helps reduce the risk that all your GICs will mature at a time when interest rates are low. Also GICs pay you a set interest rate for using your money for a certain amount of time. GICs that pay different amounts of interest, based on how well the stock market is doing. These kind of GICs are called index linked or market linked GICs. Although you can’t be sure how much you will earn with this type of GIC, it will gives you a chance to earn more if the stock market does well.