Rising interest rates may be bad news for Canadians with mortgages, but savings such as Guaranteed Investment Certificates (GICs)It also means that interest rates on instruments will rise. , prompting renewed interest in investing.
Mahima Poddar, senior vice president and group head of personal banking at Equitable Bank, saidGIC has fallen out of favor in recent years, but rising interest rates have As a result, the demand for EQ Bank, the banking digital platform, has never been greater.
"I think more and more people will come back to GIC," she said.
READ MORE: How to Recover from Tech Tech Layoffs in Canada: 'Control the Story'
According to interest rate monitoring website Ratehub.ca, interest rates on GICs are currently above 4%, with some products for five-year investments reaching 5%.
The story continues under the ad
And although the annual pace of inflation exceeds the rate her GIC offers, investment is guaranteed. properties may be attractive to investors. by the market downturn this year.
"Compared to her 5% interest rate with no downside risk guaranteed, it's very attractive," she said.
Mr. Naveen Senthamilselvan, Director of Strategic Initiatives at Meridian Credit Union, said last spring that GIC was sitting at 1-1.5%, now he is at 4-5%. said he was paying for
READ MORE: Shopify Fires 10% of Employees After Pandemic Growth Bet 'Unrewarded': CEO
However, GIC has how easy it is to access money, and the rate of return may vary, so to make sure you have the right options. He said that working with advisors remains important.
"That's something you really need to understand and talk to your advisor about. Do you want the money within six months, do you want the flexibility of it, do you want to put part of your GIC into a fixed non-redeemable period for a long period of time?” he said.
Trending Stories
"We would like to be notified when we make a final decision."
The story continues under the ad
Depending on what you choose, it will be cashable or non-redeemable for a period of time you decide. low interest rates. Term lengths also vary, with longer term options generally offering higher interest rates. Interest payment schedules may also vary by offering.
He said he was considering a phased strategy. He holds a portion of his funds in the GIC, which matures each year, and is given the option to reinvest or reallocate a portion of his overall investment each year.
RBC Financial His planner Aarash Rafiaie said it was important to understand what the money was needed for. Because it guides how you should invest your money.
"I think the majority of Canadians probably need to do more planning than in the past, especially since we see volatility in interest rates as well as stock markets," he said.
Story Continues Below Advertisement
Read More: After CEO Fires Employees Posting a crying selfie on LinkedIn
Rafiaie said GICs can be a solid source of income, but some options require cash compared to bonds or stocks that pay dividends. In that case, it may not be easily redeemed. But GICs are safer than bonds and stocks, which can fluctuate with the market, he added.
“Generally, equity-based investing tends to be more volatile than the GIC world. may not be able to beat inflation," he said.
Poddar added that it is important to do some research when looking for GICs. Fees vary by institution, and we want to keep you up-to-date on updates to ensure you always get the best rates.
"You'll see a lot of variation in rates," she said.
This Canadian Press report was produced on August 11, 2022.
© 2022 The Canadian Press
