Reduce Interest Rate Impact
GIC laddering is ideal for investors who want to potentially maximize their GIC returns without locking in all of their money for the longer term while reducing the influence of interest rate changes on the investment.
How Laddering Works
Stagger Your Maturity Dates
- Your money is initially divided into different portions; each portion is invested in a different term at the corresponding interest rate.
- Once each portion matures, the funds can be used to buy a new GIC (or you can access the money if needed).
- The choice of investment amount for each portion and the GIC term can be customized based on your individual investment needs and objectives.
GIC Laddering Example
This example shows how a typical GIC laddering is implemented. The chart shows how $50,000 would be invested using a laddered GIC strategy if you were to divide your money into equal portions and invest across 5 year term. You can continue to re-invest each maturing portion into a new 5-Year GIC to continue with the laddering strategy or a different term as your needs and objectives change.
| Initial Investment | Today | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|---|
| $10,000 | Purchase 1-year GIC | Purchase NEW 5-year GIC | ||||
| $10,000 | Purchase 2-year GIC | Purchase NEW 5-year GIC | ||||
| $10,000 | Purchase 3-year GIC | Purchase NEW 5-year GIC | ||||
| $10,000 | Purchase 4-year GIC | Purchase NEW 5-year GIC | ||||
| $10,000 | Purchase 5-year GIC | Purchase NEW 5-year GIC | ||||
| $50,000 |
Chart is for illustrative purposes only.
Key Benefits
Better Returns with Diversification and Liquidity
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Maximize Returns –
laddering provides you with both accessibility and the opportunity to benefit from the longer term GIC rates. Over time, it allows you to potentially earn more than you would by investing only in 1-year GICs.
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Reducing Risk –
Laddering GICS reduces the impact of interest rate changes on your investment. If interest rates rise, you can take advantage of the higher rates by reinvesting the money from the GIC that matures at that time. If interest rates fall, other portions of your portfolio still benefit from the original (higher) rates that were in place when you made the initial investment.
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Convenient Access –
Since not all your money is invested for the longer term; you can access portion of your GIC portfolio at each maturity.
