GIC investment in uncertain times 

It can often be said that we don’t know where we are headed in terms of the financial climate and markets. Although analysts and commentators can make educated guesses, it always remains to be seen and that is true now more than ever. While signs are pointing to rising interest rates, we don’t know when or by how much. Inflation is also on the rise, meaning that consumers may have less disposable income for investment and purchasing power in general. But it’s unclear if that will materialize according to predictions.

Many financial advisors will tell you that equities are proven to perform better over time. But you have to stick it out for the long haul, even while markets ebb and flow. The reality is that a mixture of equities and stable and fixed income investments are a great way for many investors to divide their assets and to weather uncertain times. This method of mixing tried and true with fluctuating investments is used by many and has stood the test of time. 

In terms of stable investments, GICs or Guaranteed Investment Certificates are exactly what their name implies, a guaranteed investment with a predetermined rate of return. GICs and other similar stable investments can be a good addition to any portfolio. They can be especially useful during volatile or uncertain times, when it’s difficult to predict what the next few months or years will bring. GICs, along with bonds and other similar products, provide peace of mind to investors while delivering guaranteed if modest high returns.  

Should you be making any adjustments to the steady part of your portfolio during uncertain times?  

To account for potential fluctuations to your portfolio, it’s useful to consider ways you can make adjustments to ensure flexibility and to be sure you’re getting the most from all areas of your investments. You can even make your more stable investments work better for you during uncertain periods. 

For GICs, one surefire way to ensure flexibility is to invest in a GIC ladder. This involves staggering your GICs into a series of shorter term investments. Typically, investors will purchase a series of one-year term GICs so that each year one will mature. At that time, it’s possible to reinvest your money if the terms and rates are favourable or shift it into another investment. 

The five-year ladder allows for continued flexibility over an extended timeframe. It also allows you to have regular access to your money should something else arise or if cash flow slows due to other factors.  

During uncertain economic times, investors may wish to limit long-term investments if possible. You can’t know whether interest rates will jump up or for how long, or if prolonged inflation will end up having a significant effect on the economy. The GIC ladder system gives investors the peace of mind of knowing their money is secure (guaranteed by the Canadian Deposit Insurance Corporation if invested with a member banking institution) and also accessible to allow you to maximize potential returns.