Staggering is key to GIC investing

MANY PEOPLE invest in a Guaranteed Investment Certificate (GIC), and simply forget about it until it matures.

There is a better choice, however: staggering the maturity dates of your investments.

The predicament. Suppose you have $10,000 you want to invest in a GIC. Generally, certificates that mature in five years offer the highest rates of return. You could lock in all your money now and let the interest accumulate. But what if interest rates start to climb?

Alternatively, you could invest all your money for one year in the hope that rates will rise next year. But what if rates fall, or don’t rise?

The solution. To deal with the unpredictability of interest rates, stagger the maturities of your GICs.

With $10,000 available to invest, you can divide that money into five $2,000 GICs with terms of one, two, three, four, and five years. As each certificate matures, renew it for a five-year term. With this strategy, a portion of your money will always be invested at the highest available rate, and you’ll have part of your total portfolio available to reinvest at current rates at least once a year.

The same principle applies for GICs you already own. As each comes due, reinvest so that, eventually, you will have GICs maturing every year for five years. Professional guidance can help you create a staggered GIC portfolio.