When interest rates trend downward, it’s not welcome news, especially when we’re working to grow investments and build a financial plan for the future. But sometimes it pays to look at the bigger picture.

The appeal

A big part of the attraction to GICs is the peace of mind clients have with the guaranteed return of capital and interest. A drop in interest rates doesn’t affect the guaranteed return.

GICs meet short- and long-term investment needs. They provide the element of stability that many clients see as a valuable component in their balanced investment approach. The simplicity of GICs, combined with the guaranteed returns, makes for an appealing investment option — one that clients easily understand and can count on.

Canadian GIC assets in $billions

The performance

Performance isn’t always about getting the highest return — it’s about consistent returns too. Relative to other fixed-income investment options, GICs offer strong performance for retail investors, especially when they consider risk and ownership costs. It’s now possible to buy a 5-year GIC that has a higher return than the yield on a 5-year, or even 10-year, Government of Canada (GOC) bond.

GOC bond yield or GIC interest rate%

Corporate bonds tend to have higher yields than GOC bonds, and some have higher yields than GICs. For retail investors, however, it’s very difficult to buy corporate bonds that provide a higher yield than the return offered on a 5-year GIC, unless they include bonds that have a longer than 5-year maturity or higher credit risk. Corporate bonds are more liquid than GICs, but it’s important to remember they can expose clients to credit risk and the potential for capital loss, if sold before maturity.

Over the years, Canadians have become much more aware of the need to plan for adequate retirement income, to the point where choosing suitable investment strategies is a primary concern. That’s why fixed-income options like GICs can be an asset in any retirement plan.

The strategy

Many clients want to include some conservative investments in their portfolio. Those who are about 10 to 15 years away from retiring often de-risk their portfolios to preserve capital. GICs can be an excellent part of the conservative portion of their portfolio as they eliminate market exposure and protect savings. GICs are widely available for use in registered retirement savings plans (RRSPs), registered retirement income funds (RRIFs), locked-in retirement accounts (LIRAs), life income funds (LIFs), tax-free savings accounts (TFSAs) and non-registered accounts. The widespread applicability of GICs, combined with their high guarantee levels, continues to make them a popular investment option in many different scenarios, including those involving:

  • short-, mid- or long-term portfolio diversification strategies,
  • redeemable and non-redeemable features,
  • laddering strategies, and more.

Whatever the reason clients invest, it’s worthwhile to consider GICs, even in low-interest environments. If you’re currently recommending GICs as an important investment option, continue to remind clients of the value GICs offer. If you haven’t suggested GICs lately, maybe it’s time to rethink where they might fit into your practice.


Despite low interest rates, the amount of Canadian GIC assets has stayed remarkably stable over the past decade at approximately $450 billion.

A good place to start

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