For those who are not too familiar with the investments markets and get intimidated by shares, stocks and even bonds, one easy and safe option to put your money into is guaranteed investment certificates, also known as GICs. They are low on the risk factor but also give similar sorts of returns. However, GIC rates on returns can vary or fluctuate depending on economy and other factors. One should be aware about what your investment can yield. Read on to know more about this easy investment scheme.
When you sink your funds into the GIC, you will be able to choose for how long you want to take the term. The range is anywhere between one year to five years. As such, the interest will be payable to you per year on the amount invested.
Until the maturity, you cannot touch the money invested, of course. When the term ends, either you can renew the terms once more for however long or you can pull out and walk away with your interest, which would face taxation. One must know what the best route is.
Some people think that the best route is to invest year by year. On the other hand, others think it wise to let the money accrue interest for a long time. Should interest rates increase, the long-term investor might not be able to take advantage of that. Consequently, short-term investors will not know how much they will make in subsequent years. Is there a solution?
Yes, there is a solution. You need to make a studied and research-based evaluation of how much the returns would be from investing your money for a year in GICs in comparison to three or five years. This can be done by calculating the interest on the money you would be putting in. You would also have to figure out the status of markets currently and what it could be one year hence.
Of course, there are no guarantees for this! What you want to do is take this information, tally it with your personal risk or growth factor and invest accordingly.
You can opt for any other way to allow your money to earn from itself. All said and done, GICs are reliable even though their profits are not really the best. For the beginner investor or those who are happy to dabble without losing cash, this is a great way to be initiated. Given that markets are forever subject to volatility, this can be your assured means of earnings from the market itself!
What are the drawbacks with GIC, if any (considering it is a largely dependable instrument)? The only other drawback, other than rates going up and you not being able to take the benefit of that, is if you should withdraw the amount before the term is over. This brings a fine on the investor and it can be a substantial fine. So, you would rather let the money sit here, for whatever period, earn the GIC rates interest, at whatever rate and be happy. This is more fruitful than going in for a volatile investment and losing everything for the sake of risk.