Financial Channel

theres something i dont get about GIC's...
http://ingdirect.ca/en/acct_rate/rates.html
ING has these things called "short term GIC's"
They allow you to lock away money for a few months to collect interest.... minimum 90 days.

But theres also teh 1+yr GICs.
the 90 day GIC's give you 3.5%
the 1 yr 4.10%

Wouldnt you end up accumalating more money if you keep on having 90 day short term GIC's rather then having a 1 yr GIC?

hmm...interesting point! im an econ major and i'm stumped!

I'm sure they have some way of preventing this.

Hey UrbanP,

Never seen you in the PF forum. What you doing around this area?

Welcome to the world of investments!
The rate is quoted as an annual rate of return.
Thus, essentially this is what the 90 GIC yields 3.5% if it was invested for 365 days.
But, for the holding period return (90 days), it is approximately less than 1%.

I hope you can see how the 1 year GIC has a higher yield.

Cheers,

Oh... I get it... I really wish they would put that on the site.
they dont even have a link to "fine print" or anything. i guess its mentioned in the TOS before i sign up for it.

So far i want to deversify my savings... I got a high interest savings account money put away in a RRSP (only did it b/c my old company matched my contributions up to 6% of my annual earnings which was pretty sweet).

I dont have enough moeny to make anything else really worth while... so im looking @ some Gic's too.

thanks dude.

If you are just starting out... stay away from gic's!!!!

seriously? Igot less then 5g's to invest tho...
So i dont think i have many options with just 5 g's... another thing is i dont wanna take too many risk since i cant afford to lose any!

Maybe market-tied GICs? The principal is guaranteed.

ETA: If you really want a regular gic, HSBC is having a promotional rate of 4.5% for a 2-yr gic. http://www.hsbc.ca/hsbc/personal_en/...le.html&prm=hl

Also from HSBC, a stock market gic with a guaranteed 4% interest rate over a 3-yr rate (1.316% annual). It's tied to the market, so you can potentially earn a lot more.
http://www.hsbc.ca/hsbc/personal_en/...ock-market-gic

Do the math: take 100$


100$ * 3.5% (rate for 90 days) * 0.25 (annual rate divided by 4) gives you
0.875$

Take it and reinvest it as if you had a 1 year

2) 100.875$ * 3.5% * 0.25 = 0.88265625

3) 101.75$ * 3.5% * 0.25 = 0.89

4) 102.64 * 3.5% * 0.25 = 0.90

Total for 1 year after reinvesting all gains every 90 days = 103.54

Option 2: 1 year @ 4.1%. Your 100$ will yield 104.10$



Hence option 2!

unless of course the OP's savings goals have a <5 year time span then GIC are a great option. GIC are poor investments for a retirment that is 30 years away but a great choice for a house downpayment 2 or 3 years away or a car 1 year away.

I agree its good for a year. Though I would rather suggest low volatility funds with better returns for anything above 1 yr to under 5 years.

Just wondering...How many people would put into a locked in account if it gave 5% a year? Also it would increase up to a maximum of 9% if you stay in for 10 years.

Market has tanked lately. There are bargains to be had. Put the money in high risk mutual funds like emerging markets funds

LOL as previously explained the 3.5 is on an annual basis.

If you have enough, try to setup a ladder scheme with your GICs that way as rates go up and down throughout the year you can take advantage of them. Think of it as kind of blending the rates.

For example, sign up for 90-day, 180-day, 270-day, and 1 year GICs at the same time. Then the next month do it again. Then the month after repeat. After doing this 3 times you'll have it set up.

As the short-term GICs start maturing and coming out, relock them back into 1 year terms. By the time your last 270-day finishes and you relock into a 1-year and you'll have 12x1-year GICs.

RBC has a sort of automated scheme called (I think) the Five-in-One Gic. Basically they split your money in five portions and put one piece in a one year gic, 2nd piece in a 2-yr gic, etc.