Guaranteed Funds
Guaranteed Investment Certificates (GICs)
Guaranteed Investment Certificates (GICs) are deposit investment securities sold by Canadian banks and trust companies. They are often bought for retirement plans because they provide a low-risk, fixed rate of return. Your original investment value is 100% guaranteed, and depending on what type of GIC you choose, you may earn a guaranteed rate of return for a certain time period. The principal is at risk only if the bank defaults.
GICs offer a return that is slightly higher than T-bills.
Term Deposits
Term deposits are held at a financial institution for a fixed term. These investments are generally short-term with maturities ranging anywhere from a month to a few years. When you purchase a term deposit, you (the lender) can only make withdrawals after the term has ended or by giving a predetermined number of days notice.
Term deposits are safe investments, and are appealing to conservative, low-risk investors. By having the money tied up, you’ll generally get a higher rate with a term deposit compared with a demand deposit.
Treasury Bill (T-Bill)
T-bills are short-term debt obligations backed by the Canadian government with a maturity of less than one year. T-bills are sold in denominations of $1,000 up to a maximum purchase of $5 million. They commonly have maturities of one month, three months, or six months.
T-bills are issued through a competitive bidding process at a discount from par, which means that rather than paying fixed interest payments like conventional bonds, the appreciation of the bond provides the return to the holder.