A GIC, also known as a guaranteed investment contract, is an investment where an individual entrusts their funds to a company or insurer, anticipating a profit without any personal effort. It resembles entrusting someone with your money, and they commit to returning your initial investment along with additional earnings after a specific duration. It offers a means to generate income effortlessly, but it is crucial to exercise caution and comprehend the associated risks.
A GIC, or guaranteed investment contract, is an agreement where an institutional investor, like a pension fund, invests a lump sum with an insurer. The insurer guarantees to return the principal amount and a specific interest rate at the end of the contract. This type of investment contract involves investing money with the expectation of profits from a promoter or third party, without the investor having control over managerial decisions. For instance, if a pension fund invests $1 million in a GIC with an insurer, the insurer guarantees to return the $1 million plus a predetermined interest amount, regardless of the performance of the underlying investments.
A GIC, or Guaranteed Investment Certificate, is a type of investment offered by financial institutions. It is a low-risk investment that guarantees the principal amount and provides a fixed rate of return over a specific period.
When you invest in a GIC, you are essentially lending your money to the financial institution for a fixed period. In return, the institution guarantees the principal amount and pays you interest at a predetermined rate.
The minimum investment required for a GIC varies depending on the financial institution. It can range from as low as $500 to several thousand dollars.
In most cases, you cannot withdraw your money from a GIC before the maturity date without incurring penalties. However, some GICs offer a feature called “redeemable” or “cashable” GICs, which allow early withdrawals with certain restrictions.
In Canada, GICs offered by banks are insured by the Canada Deposit Insurance Corporation (CDIC) up to a maximum of $100,000 per depositor per institution. However, GICs offered by credit unions may have different insurance coverage.
If the financial institution offering the GIC goes bankrupt, the CDIC (or relevant deposit insurance corporation) will reimburse eligible depositors up to the maximum insured amount. It is important to ensure that the institution offering the GIC is a member of the deposit insurance program.
Yes, you can hold a GIC in a tax-sheltered account like an RRSP (Registered Retirement Savings Plan) or TFSA (Tax-Free Savings Account). This allows you to earn interest on your investment without incurring taxes on the gains.
If you need to access your GIC funds due to an emergency, you should contact the financial institution and inquire about any options available. As mentioned earlier, redeemable or cashable GICs may allow early withdrawals with certain restrictions.
Transferring a GIC to another financial institution is generally not possible. GICs are typically non-transferable, and you would need to wait until the maturity date to withdraw the funds and reinvest them elsewhere.
Yes, the interest earned on GICs is generally taxable as income. The financial institution will provide you with a T5 slip at the end of the year, which you will need to report on your tax return. However, if the GIC is held within a tax-sheltered account like an RRSP or TFSA, the interest is not taxable until withdrawn.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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