Historically low interest rates are no longer holding Canadians back from investing their savings in the security of Guaranteed Investment Certificates (GICs) and investors are doing so for longer terms, according to Royal Bank of Canada (RBC).
“We’re seeing more Canadians opting for terms of three to five years for GICs, compared with this time last, and one of the biggest jumps has been investments in market-linked GICs, which tie returns to the performance of a stockmarket index,” said Beel Yaqub, vice-president, RBC GICs and savings.
Yaqub said that investors seeking to match security with higher earning potential should take into consideration a number of factors when investing in a GIC, such as finding the right “fit”. According to Yaqub, investors should choose the right term for the amount of money they wish to invest, and give their investment a “booster shot” by using an automatic savings plan to build up savings to contribute to GICs.
“If you don’t want to lock all your money into any set term, consider dividing up the money you have to invest into different terms,” he said.
Yaqub also said that investors should get involved in the investment process by doing their own initial research by checking out the bank’s online resources, including GIC selector and GIC comparison tools to find out more about the various GIC options available.
Finally, investors should “talk to the pros” before investing in GICs to discuss with an adviser how these investments can help to meet investors’ savings goals.
“Investing in market-linked GICs is like investing with a parachute,” Yaqub explained. “You gain the opportunity to benefit from potential returns that stockmarkets provide, while your principal remains 100% guaranteed, just like a traditional GIC.”
RBC is currently marketing three new market-linked GICs under the MarketSmart banner, available with terms of two, three and five years, with a minimum deposit of $1,000: the RBC Canadian Banking MarketSmart GIC, based on the TSX/S&P Banks Index; the RBC U.S. MarketSmart GIC based on the S&P 500; and the RBC Canadian Utilities MarketSmart GIC, based on the TSX/S&P Capped Utilities Sector Index