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GICs & Term Deposits

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Benefits To Staggering GIC Maturities

Developing a staggered maturities plan is an easy way to help you maximize GIC returns while maintaining a secure portfolio. This proven method of investing can help you reduce the risk of interest rate fluctuations and increase the portfolio's overall return.

Staggering GICs

Staggering maturities can be achieved by:

  • dividing the amount you are planning to invest by 5 (e.g. $10,000.00 equals five investments of $ 2,000.00 each), and
  • equally investing in 5 GICs of 1 to 5 year terms (e.g. $2,000 in 1yr, $2,000 in 2yr,…$2,000 in 5yr).

As a result, 20% (1/5th) of the portfolio matures each year. This can be cashed, or reinvested for 5 years at the then prevailing rate. This strategy locks in the portfolio for higher long-term rates, yet also provides liquidity.


The following charts demonstrate the compounded return of an initial $10,000 GIC after five years for 3 different scenarios -

  1. investing in one $10k 5 year GIC,
  2. investing in one $10k 1 year GIC for 5 consecutive years, and
  3. investing $2k in 1 to 5 year staggered maturities and reinvesting maturing certificates (in the 1st, 2nd, 3rd and 4th years) at the 5 year rate as they come due.

During periods of increasing rates, the portfolio earns the highest interest by investing in a 1 year GIC in each of the 5 years ($13,761), closely followed by the staggered maturities strategy ($13,659), and lastly by investing in one 5 year GIC from the onset ($13,382).

However, during periods of declining interest rates, the greatest return can be obtained by investing in one 5 year GIC at the onset ($14,025), followed by staggering GICs ($13,475), and lastly by investing in a 1 year GIC in each of the 5 years($12,398).

* For Illustrative Purposes Only. Not intended to reflect actual interest rates.

It is often difficult to predict future interest rate trends. As a result, staggering maturities provides a strategy for maximizing return while minimizing risk.

Your goal Action plan
To reduce interest rate risk Begin by spreading the maturity dates so that one or more certificates (and approximately 20% of your GIC portfolio) comes up for renewal each year for the next five years
To increase rate of return Every time a certificate comes up for renewal, reinvest it as a 5-year GIC. Work toward a portfolio of staggered 5-year GICs with some renewing each year, so that you receive the higher long-term rates

1) In each year, the difference in rate between each GIC is ¼%. For example, the rate of a 2 year GIC is ¼% higher than a 1 year GIC, and the rate of a 3 year GIC is ¼% higher than a 2 year GIC.
2) Rates for each GIC increase/decrease by ½% each year, except for the third year.
3) In the third year, rates for each GIC increase/decrease by 1½ %, instead of the ½% in all other years, since rates do not always change by the same increment, given normal market volatility.
4) Interest compounds on an annual basis.

Rates & Numbers

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