GIC

What does GIC mean?

Guaranteed Investment Certificates (GICs) are a popular, low-risk investment option in Canada, offering a secure way to grow savings with guaranteed returns. While GICs are often seen as straightforward, learning about their features, benefits, and limitations is vital.

In this article, Wealth Professional Canada will provide a comprehensive overview of GICs. We’ll clarify what GICs are, outline the different types available, and discuss some considerations before investing. If you’re wondering whether GICs are a good fit for your clients’ investment portfolios, keep reading.

A GIC is a deposit product offered by banks and trust companies. GICs are considered low risk because the principal is protected, and they provide a fixed rate of return over a chosen term.
This can range from a few months to several years. This makes GICs a common choice for clients seeking predictable returns, especially in retirement planning. It is also a type of fixed income instrument.

The minimum investment is $500, with no set maximum. Clients select the term that suits their goals. Cashable GICs allow early access to funds but usually offer lower interest rates.

As for non-cashable GICs, they require funds to remain until maturity and generally pay higher rates. Interest rates depend on the term, type of GIC, and market conditions.

Eligible GICs are insured by the Canada Deposit Insurance Corporation (CDIC) up to $100,000 per insured category, providing an extra layer of security for clients’ deposits.

Are GICs 100% safe?

Yes. GICs are considered safe because the principal is protected and returns are predictable, provided the GIC is issued by a CDIC member and within insured limits. GICs are a safe choice for clients who want steady returns and do not want to risk losing their savings.

What is the highest GIC rate in Canada?

As of 2025, the current highest GIC for a 1-year term rate is 3.65 percent. For a 5-year term, the highest rate is at 3.95 percent. Both are offered by MCAN Wealth
To better understand how your clients can start investing in GICs, watch this video:

If you want to help your clients make good investment choices, take a look at why GICs are on the rise for investors.

Different GIC terms

GICs come in both short-term and long-term options. Short-term GICs have terms under one year, from 30 to 364 days, and offer lower interest rates. Long-term GICs run for one year or more—often one to five, seven, or even 10 years—and usually pay higher rates. The principal is always protected, and the advertised interest rate is guaranteed for the chosen term.

Factors to consider

Selecting the right GIC is a huge part of building a client’s investment portfolio. As such, try to make sure that the GIC matches your clients’ financial plans and comfort with risk.
Encourage your clients to pay attention to these factors when learning to invest in GICs:

1. Investment objectives
   Begin by understanding your clients’ specific financial goals. GICs are designed for clients who prioritize capital preservation and predictable returns. They are a good fit for clients saving for a future purchase or building an emergency fund.
   GICs do not offer the growth potential of stocks, but they provide peace of mind for clients who want to avoid market volatility and make sure that their principal is protected.
2. Level of risk
   GICs are considered one of the safest investment options because the principal is guaranteed by the issuing financial institution. Unlike stocks or mutual funds, GICs do not lose value if the market drops.
   However, it is important to confirm that the GIC is issued by a reputable, regulated institution and is eligible for deposit insurance. Deposit insurance, such as coverage from the CDIC, protects your clients’ money up to certain limits if the issuer fails.
   This added layer of security is a key reason why GICs are popular among conservative investors.
3. Term length and liquidity
   GICs are available in a wide range of terms, from as short as 30 days to as long as 10 years. The term should match your clients’ investment timeline and when they will need the funds. Short-term GICs offer more flexibility but usually pay lower interest rates.
   Long-term GICs provide higher rates but require your clients to lock in their money for a longer period. Some GICs are non-redeemable, meaning your clients cannot access their funds until maturity. Others are cashable or redeemable before the end of the term, but these often come with lower interest rates or penalties for early withdrawal.
   It is critical to review the terms and conditions with your clients, so that they understand the implications for liquidity.
4. Interest rate type
   GICs can have fixed, variable, or market-linked interest rates. Fixed-rate GICs pay the same interest for the entire term, providing certainty about returns. Variable-rate GICs have rates that might change during the term, depending on market conditions.
   Market-linked GICs tie returns to the performance of a stock market index, offering some growth potential while still protecting the principal. Each type has its own advantages and should be matched to your clients’ preferences and risk tolerance.
5. Minimum investment amount
   Most GICs have low minimum investment requirements, making them accessible for clients who want to start with small amounts. This feature allows your clients to add GICs to their portfolios easily, even if they are just beginning to invest or want to diversify their holdings.
6. Tax consequences
   Interest earned from GICs is fully taxable in non-registered accounts. Placing GICs in registered accounts such as a Registered Retirement Savings Plan (RRSP) can help your clients reduce or defer taxes on interest income. Understanding the tax implications is also necessary for maximizing after-tax returns.
7. Inflation risk
   While GICs provide safety and guaranteed returns, the fixed interest might not keep up with inflation over time. This can reduce the purchasing power of your clients’ money, especially with long-term GICs.
   Consider using a GIC ladder strategy, where your clients invest in GICs with different maturities, to help manage interest rate and inflation risk.
8. Redemption features and penalties
   Not all GICs can be redeemed before maturity. If your clients might need access to their funds, look for cashable or redeemable GICs. Always review any penalties or reduced interest for early withdrawal to make sure that your clients are aware of the trade-offs.

Is a GIC a good investment?

Short answer: yes, GICs can be a good investment for your clients. This is especially true for those who value safety and predictable returns. GICs are well-suited for long-term investing because they encourage your clients to stay invested during market uncertainty.
The principal is protected, and returns are guaranteed, which supports your clients in reaching their financial goals. Other reasons why GICs are popular with your clients include:

• low minimum investment amounts, making it easy to start with small sums
• simple structure, so your clients do not need to monitor the investment constantly
• automatic purchase options for some institutions, allowing your clients to invest regularly with less effort
• no exposure to market volatility, which appeals to those who prefer a hands-off approach and capital preservation

Is a GIC better than a TFSA?

When your clients are deciding between a GIC and a Tax-Free Savings Account (TFSA), it’s important to understand what each option offers. As discussed earlier, a GIC is a low-risk investment where your clients deposit money for a fixed period and earn a set interest rate.
A TFSA is a registered account that lets your clients earn investment income tax-free. They can hold different types of investments in a TFSA, these include:

• GICs
• stocks
• bonds
• mutual funds

Any interest, dividends, or capital gains earned in a TFSA are not taxed, and your clients can withdraw money at any time without penalty.
Overall, choosing between a GIC and a TFSA depends on your clients’ goals. If they want guaranteed returns and do not need access to their money right away, a GIC might be suitable.
If they want flexibility and the ability to grow their money tax-free, a TFSA is a better option. Your clients can even hold a GIC inside a TFSA to combine safety with tax-free growth:

Learn more about TFSAs (plus another savings plan) when you read this article.

Setting your clients’ expectations about GICs

GICs provide your clients with a secure investment option that preserves capital and delivers predictable returns. Issued by Canadian financial institutions, they also guarantee the principal and pay fixed or variable interest over a specific term.
Unlike mutual funds or stocks, GICs do not expose your clients to market volatility, making them ideal for those prioritizing stability. However, GICs generally offer lower returns and require funds to remain invested until maturity.
To end, it’s vital to evaluate your clients’ risk tolerance and financial goals to determine if GICs fit their investment strategy.
Check out more articles about GICs when you scroll down below!

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