When we opened a self-directed online brokerage account, I wanted to check if we should use it to invest in GICs. (GICs are guaranteed investment certificates.) I wanted to know what the pros and cons were of buying GICs this way. And I wanted to understand why the banks would offer this service seemingly for free. In short, I wanted to understand the pros and cons of buying GICs in a brokerage account.
Written: 2012
Reviewed: 2023
Revised: 2023
I admit we have a large amount of our RRSP savings in GICs. It’s what I need to sleep peacefully.
What Do BMO InvestorLine and CIBC Investor’s Edge Offer for Sale for GICs?
In registered self-directed InvestorLine accounts and Investor’s Edge accounts in 2023, the minimum purchase size for a RRSP GIC is $5000. After that, it goes up by increments of $1. So you can buy a $5000 GIC, a $5001 GIC or a $5123 GIC, your choice.
This $5000 starting point is a bit of a nuisance if you have dividends coming in that you want to re-invest in a GIC. However, if you stagger your GIC maturity dates widely enough, you could always add to an existing GIC after it matures and before you re-invest it.
The GICs listed for sale are offered by a wide variety of bank, credit union, trust company and other financial institutions. For further information, also see the article: Comparing GIC Interest Rates for BMO InvestorLine and CIBC Investor’s Edge Accounts.
Pros of Buying GICs within a Self-Directed Online Brokerage Account
- BMO InvestorLine and CIBC Investor’s Edge sell GICs from trust companies which offer higher rates than many Canadian banks.
- When they mature, the principal and interest for the GICs are paid back into your InvestorLine or Investor’s Edge account in cash.
- You can invest with a variety of financial institutions without having to set up separate RRSP or TFSA accounts with each of the institutions. Instead, you manage everything through your one self-directed RRSP account and your one self-directed TFSA account.
Cons of Buying GICs within a Self-Directed Online Brokerage Account
- In 2023, the minimum investment is $5000 for BMO InvestorLine and CIBC Investor’s Edge. (Always check minimums before purchasing, as the banks can change them without notice.) If you buy GICs directly from financial institutions, the minimum required investment is usually much lower than this.
- They do not offer GICs from every financial institution in Canada.So you cannot buy a Tangerine GIC through InvestorLine. They usually offer GICs from about 20 institutions though, and the list of places changes from time to time.
- For BMO and CIBC, the GICs cash out back into your account at the end of their term. Wasn’t this a Pro? Well, yes, but the possible drawback is that you have to keep an eye on your maturity dates and remember to re-invest them..
- You have to buy a GIC by the daily cutoff time to ensure you get the rate posted at the time of purchase. At the time this was written, the cutoff time for BMO InvestorLine purchases was 3:45 p.m. “except on early closing days.” This deadline is not emphasized. You have to remember it.The cutoff time for CIBC Investor’s Edge is 4 p.m. but they state that if they cannot complete the order by day’s end they will cancel it and you will have to start again on the next trading day. You can’t apply to buy the GICs in the evening or on weekends.
- You cannot cancel a GIC purchase order once placed. This is annoying if the rate increases during the day, after you placed your order but before your order is filled at the start of the next business day.To be fair, this is also the way equity purchases work. You can’t cancel your purchase order of Bell stock just because it’s now $1.50 less a share than when you bought it 10 minutes ago!
Disclaimer
All fees and commissions, and minimum purchase requirements were accurate at the time of writing in 2023. Always check with a financial institution for policy changes before making any commitments or investments.
Related Reading
Join In
Do you use a self-directed brokerage to manage your GICs? Do you prefer to keep your GICs independently with a financial institution? Please share your experiences with a comment.