You might be familiar with the idea of Guaranteed Investment Certificates (or GICs) where you invest, and you’re guaranteed to earn a certain return on your money after a specific amount of time.

You also likely know what the stock market is. Here in Canada stocks are traded on the Toronto Stock Exchange (TSX). Individuals can choose to purchase stocks in the hopes they’ll increase in value and provide returns (growth) on their original (principal) investment.

There are pros and cons to both investing in GICs and in the stock market, depending on your financial situation and goals.

An illustration of a blue bar chart with a green arrow above it. The top right of the arrow has 2 green leaves. On the right is a blue shield with the word "GIC" and a green arrow pointing down at a stack of coin. It represents the benefits of stock market GICs.

Enter the stock market GIC (sometimes called market linked GICs) – a hybrid of both concepts. It combines the security of a GIC with the enhanced return potential of stock market investments.

There are many benefits to saving your money in stock market GICs:

Potential for higher returns

With a stock market GIC you’re tapping into the growth potential of the Canadian stock market, rather than settling for a defined return on your money (for example 2% on a 5-year term). When interest rates are low, this can help you grow your money faster in the same, or even a shorter time frame.

Servus Big Share: Stock Market GICs. Want the benefits of the stock market without the risk? Servus Big Share: Contribute to your RRSP and you could win $1 million*. On the left is a shield with an arrow above a bar chart representing the stock market.

Reduced risk

You’ll enjoy peace of mind knowing that your principal investment is guaranteed and not subject to any fluctuation in the stock market. You’ll get back what you put in (at minimum guaranteed) no matter what.

Ease and simplicity

Investing in a stock market GIC offers you the combination of principal protection and growth potential all in one product. Instead of investing in multiple products – some riskier, some safer – you get the best of both, helping to simplify your finances.

So, is investing in a stock market GIC right for you? Ask yourself these questions:

  1. Are you looking to earn a higher rate of return than traditional GICs or other term savings options?
  2. Do you want security by eliminating any risk to your principal?
  3. Will you be okay not having access to your money for the length of the term?

If you answered yes to each question, then a stock market GIC is likely a great option for you!

If you’re unsure of how a stock market GIC can fit with your financial plan, a Servus expert can help. Contact us anytime.