With record low rates, is there a place for GICs in your portfolio? Maybe if you are replacing a Bond Mutual Fund or even a Bond ETFs.
Management fees on bond mutual funds eat up most of the return of the investments. Even a low fee fund like PH&N Bond Fund has a MER of 0.6% which takes 23% of the portfolio's Yield to Maturity of 2.6% - you lose almost a quarter the the returns in fees! You can expect to put the remaining 2% in your pocket. With other high MER funds you could be losing half of the funds returns in fees.
With ETFs you are in the same boat - iShares Canadian Government Bond Index ETF (XGB) holdings have a Yield to Maturity of 2.28% and MER of 0.38% - you lose 17% - you put only 1.9% in your pocket. You can do better with a high yield savings account. Oaken Financial has a savings rate of 1.75% and Achieva Financial has a rate of 1.8%. GIC rates are even higher.
UNLIKE BOND FUNDS AND ETFs, SAVINGS THE GIC PRINCIPAL AND RETURN IS GUARANTEED: Oaken deposits (through Home Trust Company) are insured through the Canada Deposit Insurance Corporation (CDIC). Every dollar deposited with Achieva is 100% guaranteed without limit by the Deposit Guarantee Corporation of Manitoba.
Oaken Financial continues to offer the best rates on GICs. A 5-year GIC rate is 2.8% which is greater than your net return on the bond fund or bond ETF yield after payer the MER. Here are today's rates:
Management fees on bond mutual funds eat up most of the return of the investments. Even a low fee fund like PH&N Bond Fund has a MER of 0.6% which takes 23% of the portfolio's Yield to Maturity of 2.6% - you lose almost a quarter the the returns in fees! You can expect to put the remaining 2% in your pocket. With other high MER funds you could be losing half of the funds returns in fees.
With ETFs you are in the same boat - iShares Canadian Government Bond Index ETF (XGB) holdings have a Yield to Maturity of 2.28% and MER of 0.38% - you lose 17% - you put only 1.9% in your pocket. You can do better with a high yield savings account. Oaken Financial has a savings rate of 1.75% and Achieva Financial has a rate of 1.8%. GIC rates are even higher.
UNLIKE BOND FUNDS AND ETFs, SAVINGS THE GIC PRINCIPAL AND RETURN IS GUARANTEED: Oaken deposits (through Home Trust Company) are insured through the Canada Deposit Insurance Corporation (CDIC). Every dollar deposited with Achieva is 100% guaranteed without limit by the Deposit Guarantee Corporation of Manitoba.
Oaken Financial continues to offer the best rates on GICs. A 5-year GIC rate is 2.8% which is greater than your net return on the bond fund or bond ETF yield after payer the MER. Here are today's rates:
GUARANTEED INVESTMENT CERTIFICATES (GIC)
Term | 1 year | 18 mths | 2 year | 3 year | 4 year | 5 year | Min. Dep. |
---|---|---|---|---|---|---|---|
Annual Compound or Annual Pay | 2.00 | 2.25 | 2.35 | 2.40 | 2.60 | 2.80 | $1,000 |
Semi-Annual | 1.95 | 2.20 | 2.30 | 2.35 | 2.55 | 2.75 | $1,000 |
Monthly | 1.90 | 2.15 | 2.25 | 2.30 | 2.50 | 2.70 | $1,000 |
1 YEAR CASHABLE
Term | Rate | Min. Dep. |
---|---|---|
After 30 Days | 1.75 | $1,000 |
After 90 Days | 2.00 | $1,000 |
SHORT-TERM DEPOSIT(RSP from 90 days minimum $2,500)
Term | 30-59 days | 60-89 days | 90-119 days | 120-179 days | 180-269 days | 270-364 days | Min. Dep. |
---|---|---|---|---|---|---|---|
Paid at Maturity | 1.75 | 1.75 | 1.75 | 1.75 | 1.85 | 1.90 | $1,000 |
RETIREMENT SAVINGS PLANS (RSP)
Term | 1 year | 2 year | 3 year | 4 year | 5 year | Min. Dep. |
---|---|---|---|---|---|---|
Annual Compound | 2.00 | 2.35 | 2.40 | 2.60 | 2.80 | $1,000 |
TAX FREE SAVINGS ACCOUNT (TFSA)
Term | 1 year | 2 year | 3 year | 4 year | 5 year | Min. Dep. |
---|---|---|---|---|---|---|
Annual Compound | 2.00 | 2.35 | 2.40 | 2.60 | 2.80 | $1,000 |
RETIREMENT INCOME FUNDS (RIF)
Income Options: Annual, Semi-Annual, Quarterly and Monthly
Term | 1 year | 2 year | 3 year | 4 year | 5 year | Min. Dep. |
---|---|---|---|---|---|---|
Annual Compound or Annual Pay | 2.00 | 2.35 | 2.40 | 2.60 | 2.80 | $10,000 |
OAKEN SAVINGS ACCOUNT
Oaken Savings Account | 1.75 |
Achieva rates are competitive too. Daily Interest Savings rates on TFSA Savings, RRSP Savings and RRIF Savings and GIC rates are listed below.
|