5 Factors That Will Impact GIC Investments
The terms and conditions of a GIC investment can change depending on the institution. Although savvy investors are aware of these changes the majority of first-time depositors are at risk of being unprepared when deciding on an institution.
Some of the most important changes that can impact the investment are outlined in more detail below and include: the term of the investment, the penalty fees associated with accessing it, the ease of withdrawing the funds, and the overall rate of interest.
1. The Term
The most important change to be aware of is the term of the investment. The term can change based on the needs and preferences of the individual investing the funds and dictates how long the money will need to remain in the account. This helps guarantee that the money will remain secure over the period but means that investors should consider when they’ll need to use the money and select an institution that is complements it. Depending on the institution, the term of the investment can range from mere months to decade long contracts that cannot be altered.
2. Penalty Fees
When selecting an institution to invest with another aspect that can change deeding on the company is the fee’s associated with accessing the money. Seeing as the money will be in a secured account for a designated period of time every company that holds the money will charge for access to money before the term is up. This can have a significant impact on those who invested smaller amounts with companies that charge high withdrawal rates because the institution will automatically apply the interest to the remaining balance in the account.
To avoid losing out on the initial investment it is recommended to carefully consider the term to avoid accessing the money before its up. Finally, investors should try to select an institution with smaller penalty fee if they are unsure of their needs to protect their investment in the future.
3. Ease of Access to the Funds
Some institutions can make it difficult and time consuming to access the money placed in a GIC account. This can prove to be disappointing for those involved in emergency situations or difficult financial times that require immediate access to the money. To avoid lengthy discussions and procedures it is advised to discuss the institution’s accessing process prior to selecting a holder.
4. Minimum Amount Invested
Many first-time investors are not aware that certain accounts and institutions require a minimum investment amount to hold an account with them. This can prove to be disappointing for those interested in securing smaller amounts or who may need to access some of the money in the future because they won’t have the option.
Given the variety of minimum amounts offered by institutions it is best to research the conditions prior to selecting a company.
5. Taxed Amounts
Another factor that can contribute to a lower than expected return on investment is the taxable amount that individuals will need to claim. This amount can be impacted by a number of factors with the main impact being if the individual pulls the funds out of the account and uses it to fund their daily life.
This can have an impact on the original amount that was invested because any money that is pulled out and used by the individual (without being re-invested) will need to be claimed as income and become subjected to taxes. This taxable amount can be avoided by waiting longer for the investment to grow and trying to limit access to the money as much as possible before retirement.