Bonds versus GICs
While they share some characteristics, several key differences
exist between bonds and guaranteed investment certificates (GICs).
A bond is a certificate issued by a government
or corporation (as a method of raising capital) that pays a fixed
sum of interest until maturity. At maturity, the principal amount
is repaid to the investor.
A GIC is a deposit investment offered
by Canadian financial institutions with a specific rate of return
for a set period. The principal and interest on a GIC are guaranteed
by the Canada Deposit Insurance Corporation.*
A Comparison Between Bonds and GICs
| Fixed term to maturity |
x |
x |
| Regular interest payments |
x |
x |
| Interest rate set when issued |
x |
x |
| Repay face value at maturity |
x |
x |
| Covered by Canada Deposit Insurance Corporation |
|
x |
| Backed by issuer’s ability to repay (reflected in credit rating) |
x |
|
| Publicly traded after it is issued
(i.e. you can sell it) |
x |
|
| Total return = regular interest payments |
|
x |
| Total return = regular interest
payments + gain or loss on bond if sold prior to maturity |
x |
|
|
The total return for a bond issued at par and held to maturity
would be very similar to a GIC with the same term to maturity and
interest rate. The value of the bond may fluctuate because it can
be traded after it is issued. GICs tend to be more appropriate
for conservative investors because their value does not change.
To learn about individual RBC Funds and how they can address your
investment objectives, access our Fund
Updates. If you are ready to invest now, contact your advisor
or explore the options
available to invest with RBC Financial Group.
*subject to certain restrictions
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