Three things to know if you're thinking about GICs

min read

Financial markets can be subject to periods of event-related volatility that may leave you feeling anxious about your investments. If you’re thinking twice about your current investment plan, it’s important to keep in mind that time in the market beats timing the market. You should also consider the time horizon you have for your investments and why inaction may be the best action for you to take.

 

Staying invested

If you’re worried about the market environment and considering moving your money into guaranteed investment certificates (GICs), here are some things you should consider first:

  • Unless you opt for the lower interest rate offered with the cashable GIC option, you’re generally locked in, leaving little room for flexibility when the market starts to recover.
  • If rates continue to be low and most rates you see are on an annual-pay basis, it could be difficult to fully satisfy your monthly or quarterly income needs.
  • GIC payments are interest-bearing only, and 100% of GIC interest income are taxable at your marginal tax bracket when held in a non-registered account.

Staying invested using fixed income funds

Fixed income funds could help decrease market risk in your portfolio and potentially grow your money. These types of funds may play an important role in your investment strategy by:

  • generating income
  • preserving capital
  • lowering portfolio volatility

Fixed income funds could be considered more conservative investments than stocks, and could provide you with a monthly income stream. They may also offer a better distribution yield than a GIC. In addition, fixed income funds offer daily liquidity (so more flexibility) and could pay on a monthly basis, supporting your monthly or quarterly income needs. If your goal is to help protect against stock market downturns, you could consider a fixed income fund.

Learn more about fixed income solutions →

 

Investing in a Fidelity fund

Fidelity Canadian Bond Fund:

  • A diversified fixed income portfolio that aims to invest in high-quality Canadian and foreign fixed income corporate debt, which can offer higher yields than government bonds.
  • Leverages Fidelity’s global resources and expertise in fixed income investing.
  • A low-risk rating for investors who don’t want to tolerate much volatility.

Learn more about Fidelity Canadian Bond Fund →

Fidelity Income Allocation Fund:

  • A diversified portfolio with lead asset allocation portfolio managers navigating risk at the asset allocation level, combined with two core equity managers who have a strict focus on downside protection from bottom-up security selection.
  • A core holding with a neutral mix of 70% fixed income and 30% equities.
  • Provides monthly income distributions while offering capital growth potential.
  • A low- to medium-risk rating for investors who don’t want to tolerate much volatility, but are comfortable with some.
  • Offers multi-asset class diversification, which can help weather volatile market conditions.
  • Distributions have historically come from a mix of interest and dividends, as well as capital gains, making them relatively more tax efficient.

Learn more about Fidelity Income Allocation Fund →

 

Market volatility is a normal part of long-term investing. By getting rid of assets too quickly, you could miss out on seeing your investments recover from downturns and even grow in value. Although past performance is not a guide to future performance, staying invested can be a way to capture as much growth from the market as possible.