Tag Archives: fixed

Where Can I Get a Good or at Least Decent Rate on a GIC for my RRSP?

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With the stock market pundits forecasting that THIS time it really is the end of the world, many people don’t want to put their RRSP money into a stock, mutual fund or ETF at least not yet. Leaving aside the arguing about whether it’s actually a great time to buy since prices are low, I decided to look and see what rates are available for a RRSP guaranteed investment certificate, GIC, and whether they are good, decent or awful.

Big Banks Do Not Often Offer Great RRSP GIC Rates

Sometimes one of the big Canadian banks will surprise me by offering a good rate for a RRSP GIC. Not this year though.

BMO has 0.85% for a one-year term or 1.25-1.5% for a 5-year term.

CIBC has a bonus rate RRSP GIC at 0.9% for a one-year term or 1.3% for a 5-year term.

Scotiabank has a 1-year at 0.9% and a 5-year term at 1.5%.

TD has a 1-year term GIC at 0.85% and a 5-year term at 1.5%.

Royal has a 1-year term GIC at 0.9% and a 5-year term at 1.5%.

None of these are cashable before maturity. There may be other terms and conditions so be sure to read carefully before you lock up your money in any GIC.

Remember banks often have some discretion about setting their rate. Ask if you can get 0.5% more. They will probably say no, but they might offer 0.25% just for asking.

E-Banks Offer Better RRSP GIC Rates

There was a time when ING Direct operated in Canada and they used to offer some quite nice rates for GICs. Now the former company is called Tangerine and is owned by Scotiabank, and the good rates seem gone.

Tangerine is offering a 1-year term GIC at 1.2% and a 5-year term at 1.9%. Better than the “big banks” but still not great.

PC Financial, which is owned by CIBC, is offering a one-year term GIC at an APY of 1.2% and a 5-year at 1.9%. Yes, that’s the same as Tangerine.

There are some smaller, newer e-Banks though.

Oaken Financial, which is controlled by Home Trust, is offering a one-year term RRSP GIC paying 1.95% and a 5-year term paying 2.5%. That 2.5% is the same amount offered for a 2-year term by Zag bank but you’re earning it for more years. In case you’re interested a 2-year term is 2.1%.

Zag Bank, which is run by Desjardins, has a 2-year term RRSP GIC paying 2.5%. You have to invest before June 1 2016. For a 1-year term GIC, their rate is 1.05% and for a 5-year GIC their rate is 1.90%. So you can see the 2.5% 2-year rate is definitely a lure.

EQ Bank isn’t offering RRSP GICs at this time.

Where Should I Buy My RRSP GIC in 2016?

So none of these places is offering a great rate for a RRSP GIC.

Personally, I’d seriously consider Oaken Financial for a one-year term RRSP GIC.  I’ve been using their services for over a year for GICs for part of our emergency fund and I’ve been pleased with the service. (By the way, I get nothing from Oaken if you buy one. I’m a customer not someone with a business connection to them!)

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Have you found some place offering a better RRSP GIC rate? Please share your victory with a comment.

How Did Our Investments Perform In 2014? I’ll “Shoyu” Mine! Part One

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I read several personal finance blogs and have been amusing myself reading all the True Confessions about their past year’s investments’ performance. So without further ado, here’s how our investments did in 2014.

Fixed Income Is a Synonym for Zero Growth

Anyone who’s been following along on my random journey to financial tidiness knows we do not invest to win big or make great gains. We invest trying desperately not to lose too much money.

(This is why I have repeatedly said you should not follow my ideas for investing unless you are prepared to get the same incredibly low returns we get!)

Anyway, back to the numbers.

How did our GICs fare?

As I’ve mentioned before, we have a huge chunk of our savings, both for retirement and for emergencies, in GICs.

On average, we got a return of 2.6% on them in 2014.

But whoa nelly, don’t forget that’s BEFORE inflation.

So based on our personal rate of inflation we: lost money. Yep, we lost 1.7% on our GIC-invested funds in 2014. Ouch.

Frankly, that was worse than I expected. In previous years, our GICs have always earned slightly above our long-term personal rate of inflation. Thanks, NOT, Ontario Hydro, property taxes and water bills.

Of course it could have been much worse. If we’d bought our GICs through a big bank, we probably would have had an average return of about 1.2%.

I attribute our somewhat better performance to the fact that we did NOT buy any market-linked GICs, sometimes called principal protected notes. We also invested in GICs through our brokerage accounts where you can buy from a large number of financial institutions. And we staggered our maturity dates across all 12 months to take avoid having to renew everything in a “bad” month.

Now how can I be happy with a -1.7% rate of return? I’m happy because the amount we have in GICs, combined with CPP and OAS, is still enough to guarantee an acceptable income in retirement for us, if they can keep pace with inflation until we die at age 100. These GICs represent our retirement “safety net” and the money invested in them is not required to do more than provide this insurance policy.

How did our Bonds fare?

We currently don’t own any individual bonds. Instead, we have put a large slice of a DC pension into a PH&N mid-length term-to-maturity bond fund. It does not invest in junk bonds but it does have the ability to get up to some interesting tricks buying and selling bonds rather than just holding them to maturity. For me, this fund seems very risky. Can you tell how risk averse I am when I am scared of a bond fund managed by arguably Canada’s best bond fund managers?

Anyway, according to the most conservative estimate (mine) this fund returned 7.8% last year. (I had a bit of trouble doing the math properly, since I took a large chunk out of it mid-year.) According to the DC pension statement, our personal rate of return last year for this fund was 8.8% after all the different levels of fees and commissions.

Do I expect that again this year? No. I was astonished they managed that last year! Everyone keeps telling me that any second now bonds will crash as interest rates begin to climb. So I have no idea what to expect for 2015.

It does help balance the loss our GICs experienced. In fact, it more than offsets it.

Stay tuned for Part 2 where I check on our ETFs and other Equities.

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How did your investments fare in 2014? Can you call accidentally adding another few quarters and dimes to the “under the car seat and behind the couch cushions” fund “investing?” Please share your enthusiasm or whining with a comment.