The ABCs of GICs

Author: News Canada

(NC)—In years past, guaranteed investment certificates (GICs) have been regarded as “plain vanilla” investments. GICs in fact suit the needs of all investors — from those who are security conscious to those who have a more aggressive investment approach.

“Investors of every profile should consider including GICs into their portfolio mix,” says Julie Sheen, Vice-President, BMO Term Investments. “They preserve the safety of the initial investment and depending on the type chosen, can offer stable interest rate returns and growth potential.”

There are a number of options you should consider before you decide which GIC is best suited to your needs:

Short- vs. long-term: GICs can be held either short or long-term, with maturity dates that range from one day to ten years. Typically, longer-term GICs offer higher interest rates. However, rate of return should not be your only consideration factor when choosing a GIC. One-to-five year GICs may be ideal if you are saving for a defined goal, such as a vehicle purchase, where you have a relatively good idea as to how long it will be before you will need the funds. Some GICs offer the benefits of both: short-term options along with interest rates that are guaranteed to increase over time so that the longer you can invest, the better. A BMO RateRiser GIC, for example, is one such product that is built on the premise that the longer you can invest, the greater the rewards will be as interest rates increase over the term of the investment.

Cashable vs. non-cashable: If you are looking for flexibility in your investments, you may want to consider a cashable GIC. These investments give you the option of accessing your money before the GIC’s maturity date. Conversely, non-cashable GICs must be held until maturity, but they generally reward investors with a higher interest rate.

Registered vs. non-registered: Most GICs are eligible to be held inside a registered investment account, such as an RRSP, RRIF or RESP. Holding GICs within your registered plan is an ideal way to have your investments grow faster as they remain tax-sheltered until they are withdrawn.

A visit with a financial planner at your local bank branch can help you decide on the best mix of GICs to help you reach your investment goals.

Information provided by BMO Term Investments. For more information visit your nearest BMO Bank of Montreal branch, or call 1-888-771-0123 or visit

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You can also get further information on GIC’s from one of our independent brokers. Use our GIC Form to talk independent broker who will get you the highest interest rate.