GICs play an important role in a balanced
portfolio because of the security they offer. GICs provide a
secure way to save for short-term goals, like a vacation, or for
longer-term plans, like buying a house or retirement. Either
way, a GIC is a sound investment option.
When you buy a GIC, you invest a sum of money
for a specific term, or period of time. At the end of that term,
you are guaranteed to receive your full principal - your initial
investment - plus interest income on your money.
Laddering Your GIC Saving
Ever climbed up a ladder? Now you can watch
your money do the same. This proven savings method for GICs
ensures you get the most return for your investment. The idea is
to use different interest rate environments to your financial
Here's how it works. Instead of investing
$5,000 into a five-year term, break it up so that $1,000 is in a
one-year term, another $1,000 is placed in a two-year, $1,000 in
a three-year, and so on. When the first term matures at the end
of one year, then renew it into a five-year term. When the
second term matures, renew it for five years, and so on.
Now what eventually happens is you will have a
five-year GIC maturing every year. By laddering your GICs, you
are always hedging to make the most interest available -
regardless of the rate environment.