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:
GUARANTEED INVESTMENT CERTIFICATES (GIC)
| 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
| After 30 Days | 1.75 | $1,000 |
| After 90 Days | 2.00 | $1,000 |
SHORT-TERM DEPOSIT(RSP from 90 days minimum $2,500)
| Paid at Maturity | 1.75 | 1.75 | 1.75 | 1.75 | 1.85 | 1.90 | $1,000 |
RETIREMENT SAVINGS PLANS (RSP)
| Annual Compound | 2.00 | 2.35 | 2.40 | 2.60 | 2.80 | $1,000 |
TAX FREE SAVINGS ACCOUNT (TFSA)
| 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
| 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.
