Financial Foundations: GICs
Hi! I’m Nick, and welcome to Financial Foundations. I’m going to cover several concepts of investing that may seem confusing and show you that they’re actually simpler than you think. Let’s talk about GICs.
A guaranteed investment certificate, or term deposit, is an investment that offers a guaranteed rate of return over a fixed period of time. A GIC can be purchased through banks and credit unions.
When you invest into a GIC, you are pretty much loaning your money to the bank for a certain amount of time, typically from a few months up to five years. Of course, the bank agrees to pay you back your original amount at the end of that term along with some interest to say thank you for lending them the money.
You would invest into GICs because they are considered to be low risk investments, since the only risk you really have is if the bank or the credit union were to go bankrupt.
Because the risk is low, your return on investment is also low, especially in comparison to other investment types such as stocks, bonds, or mutual funds. However, the returns are typically higher than a general savings account since you are not allowed to withdraw your money until your term has ended.
There you go! You now know what a GIC, or term deposit is. Pretty simple, huh? I’m Nick and thanks for joining me on Financial Foundations. See you next time!