By Rupee Finances 
Introduction:
For instance, say you need a secure, reliable method of growing your money, without the
fear of the fluctuations in the stock market, you may have caught wind of something that goes
by the name Guaranteed Investments Contracts (GICs). However, what really is a GIC, and
how will it help you?
Below, we have listed everything that you should know about GICs in this article so that you are
able to determine whether they are suitable to your financial objectives.
What Is Supposed to Be a Guaranteed Investment
Contract (GIC)?
A Guaranteed Investment Contract (GIC) is sort of like a promise by a bank or a credit
union. You give them your money on a fixed amount of time and in your turn, they promise to
pay you the amount back plus some interest.
Stated differently, guaranteed returns happen in GICs. You have no surprises as you know
precisely how much you are getting at the end of the term and keep your first deposit safe.
Why GIC?
GICs are particularly admirable among conservative investors who look out to security rather
than to large earnings. GICs are an excellent option when it comes to investing your money in
case you are the person who dislikes the thought of investing your hard-earned cash in
something riskier. They are easy, not dangerous, and easy to comprehend and this is what
makes them attractive.
What Is a GIC?
How a GIC works is that you deposit your money with a financial institution (such as a
bank) in a predetermined amount of time which could be anything up to 5 years or even longer.
The institution received in exchange payment of a fixed rate of interest on the term. The
coolest thing is that it is: At the termination, you do receive back all the principal without loss to
you or any inconvenience to you.
An Example
As an example, suppose you put in 10000 dollars in a GIC at 3 percent fixed interest over 3
years. After those three years, you will make a profit of 100$ plus the sum of 900 dollars in
the form of its loss. This will amount to 10,900 bucks. It is as easy as that!
There is one consideration to take note of, you might require access to your money before
the GIC matures and again this might contain some penalty or reduced interest offers thus
you need to ensure that your GIC term fits your finances.
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The Following Are Some of the Different Classes of GICs
That You Need to Know About
GICs are not a one size fits all. It comes in a few varieties and they all have their advantages
and disadvantages.
Fixed-Rate GICs: These GICs are fixed interest rate all through the term. It is a good option in case you enjoy
the thought of having certainty concerning the amount of earnings. When the market
interest rates rise or fall it does not affect your rate.
Variable-Rate GICs: In case of variable-rate GICs, interest rate fluctuates depending on the odds of the market.
The second implication is that you might receive a higher interest provided that the rates are
high. But on the other hand, there lurks the risk that interest may decrease especially
according to the market.
Synthetic GICs: A synthetic GIC is slightly more complex in nature and tends to be provided to institutional
investors. It consists of a combination of investments such as bonds and stocks and though
it promises greater returns, it is more risky in comparison to the traditional GICs.
What Is Different About Traditional GIC and Synthetic
GIC?
The factor that predominantly distinguishes between typical GICs and synthetic GICs is risk.
Traditional GIC: They are easy, plain and safe. You know what you are doing and you are
assured of no risk to your principal.
Synthetic GIC: These consist of a combination of assets: e.g. bonds or stocks. Although they
carry the promise of superior returns, they are also riskier and, therefore, does not suit
everybody.
A traditional GIC would be the way to go in case you are new to the investment world, or
want a guaranteed payout. If you, on the other hand, want more complicated alternatives,
and have the ability to deal with a little risk, you may consider artificial GICs.
The Advantages of the GICs: What Investors Love About
Them
Low Risk
The most attractive factor of GICs is that it is low risk. It is a security that will ensure you do
not have to fear about stock prices or crashes in the market.
Guaranteed Returns
When you have a GIC, you are clear just what you are getting. Nothing is a surprise and you
can plan your money around a targetable payback.
Easy To Grasp
GICs are easy to comprehend. You hand over your money to a bank and they pay you some
interest. That’s it. No one needs to monitor every day the stock market or be concerned with
complicated investments.
Peace of Mind
Are you a person who likes to have peace of mind? GICs can give you that. You will not need
to be worried that you might lose your investment. It happens to be one of the least risky forms
of enablement of savings.
Simple Step-by-Step Guide on How to Invest in a GIC
Shopping to start one GIC? This is how you should do it:
Exercise a comparison: Spend some time comparing banks and credit unions. Compare
their rates, their terms, and do they give early withdrawal options.
It is possible to begin with such opportunities as:
Pick Your GIC Type: What rate will you take; will it be fixed or variable? How long are you
comfortable locking away your money away?
Initiate Your Investment: After selecting the GIC that fits you, then the next step is depositing
the money with the financial institution. A certificate in which the terms of your GIC are
explained will be provided to you.
Invest and R.S. Earn: Once you have remitted, rest back. Your money is on your side here, as
your money is earning interest on a fixed rate and this happens until the term is completed.
The Table of Estimated Interest
This table is based on the interest calculation of simple interest in order to simplify it. The
value of the returns on the compounding may have a slight variation at varying terms.
Conclusion
GICs are developing a good alternative to all people who desire security of their
investments, simplicity, and ease of prediction. Though they do not open your purse very
fast, their little risk, liquidity, as well as assured performance combined with their lack of
stress of composition make them the source of total-perfection or securities in any
conservative fund program.
If you are interested in your money to be saved, and hence keep growing, free of investment
risks in the stocks markets or simply want sleep without worries, GICs can help it all.
