GIC Myths Unveiled
Myth #1: GICs are only suitable for conservative or inexperienced investors.
Fact: Guaranteed fixed investments such as GICs are an integral part of a balanced portfolio for every type of investor.
A balanced portfolio consisting of GICs, stocks, bonds and mutual funds reduces the degree of potential highs and lows and helps produce steadier returns over time. GICs are suitable for your personal portfolio or if investing for a small business.
Myth #2: GICs are for older investors.
Fact: Almost half of CIBC GIC investors are under the age of 55.
With the introduction of innovative escalating rate, index-linked and cashable GICs, GICs now meet the needs of investors of all ages.
Whether you're saving for your first home, a family vacation or just need a place to keep your money safe, the security and peace of mind offered by GICs make them appealing to everyone.
Myth #3: GIC returns are low.
Fact: There are many different types of GICs that allow you to maximize your GIC returns.
Premium rate GICs such as the CIBC Bonus Rate GIC and the non-redeemable CIBC Escalating Rate GIC™ offer better rates than regular long-term GICs.
Index-linked GICs such as the CIBC Market Mix GIC™ and the CIBC Stock Market Advantage GIC™ offer interest that is linked to changes in key stock market indices over the term of the GIC and give you unlimited growth potential1. Like regular GICs, your initial investment is 100% guaranteed.
Investors come out ahead in the long run by maintaining a long-term view. Here's how:
Myth #4: You shouldn't invest in a GIC if you expect interest rates to rise.
Fact: There are GICs that are right in any interest rate environment.
Escalating rate GICs such as the 3- and 5-Year CIBC Escalating Rate GICs offer competitive rates that increase each year of the GIC term.
And, if you want the flexibility to redeem your GIC before maturity to take advantage of an increase in interest rates, the CIBC Flexible GIC™ and the CIBC Cashable Escalating Rate GICTM 2 provide ideal solutions.
1 Your interest on these GICs depends on if, and how, the related indices (index) increase(s) over your GIC's term. Interest will be calculated in accordance with the formula set out on the Information Statement (issued at time of purchase but also available on request at any CIBC branch or through 1-800-465-CIBC (2422)). Interest is not guaranteed; if the index(es) falls, there may be no interest. Interest is subject to a participation rate, which means that you will receive a percentage of any increase; the participation rate is set when you buy the GIC. Principal is repaid at maturity.
2 With the CIBC Cashable Escalating Rate GIC, you may redeem only on the anniversary dates or within 7 days after. If you redeem within 7 days after an anniversary date, you get interest to the redemption date based on the preceding year's(s') interest rate(s) disclosed at the time of purchase.
The information in this article is general only; it is not intended as specific investment, financial, accounting, legal or tax advice for any individual.
GICs play an important role in an investment plan. By "staggering" or "laddering" your investments equally between several GICs, and reinvesting into 5-year terms at each GIC's maturity, you can:
- Earn the higher interest rate of a longer term GIC
- Have the opportunity to re-invest in a rising rate environment
- Offset the risk of interest rate declines
- Have access to GIC funds each year if you need them
Copyright® 2007 Canadian Imperial Bank of Commerce. All rights reserved.