The ‘Real’ Return of a GIC
I hear a lot of investors turning to GIC’s given the volatility in the markets.
However, do you account for the real return of a GIC?
What I mean by real return is the tax and inflation factors.
For example, say you have excess cash in your corporation, and you are considering buying a GIC.
According to Mackenzie Investments, if you were to purchase a GIC in a taxable account like this the real return of a GIC has often been negative throughout history.
When choosing investments, it is crucial to evaluate your options through the lens of real return.
If you have a longer term time horizon and depending on your risk tolerance, sometimes the low-risk path of a GIC can work against you.
As a Portfolio Manager, I look at all different factors when choosing investments for clients, like the real return of a GIC.
While GIC’s I do think are suitable in some cases, you need to know the whole picture.