For years, the humble GIC — guaranteed investment certificate — was dismissed by many fixed-income specialists and financial advisors. That view began to change as interest rates climbed in Canada and the U.S. Over recent months, retail investors in Canada have found one-year GICs paying around 5%, with longer terms typically offering a little over 4% for three- to five-year products.
When fixed-income markets suffered big losses in 2022, investors who held money in GICs were often spared the worst of that volatility. My own family set aside portions of our fixed-income allocation in laddered two-year GICs for several years. Today we’re gradually extending those ladders to five-year GICs while hoping our modest bond ETF holdings at least return to break-even over time.
Interest rate: 3.25%
Interest rate: 3.50%
Aside from GICs, a safe and more flexible way to grow cash is a high-interest savings account. Consider the best options available in Canada for 2026.
Are GICs a good investment?
Some financial advisors remain skeptical, even with rates at multi-decade highs. One valid critique is liquidity: locking money into a five-year GIC reduces flexibility. That concern can be mitigated by laddering GICs so that a portion matures every one to two years. Alternatively, cashable GICs sacrifice a bit of yield in exchange for greater flexibility.
In a recent MoneySense reader survey about “bad money advice,” respondents were asked which trends they had at some point adopted. The most common reply—nearly half—was “none of the above.” Among the other answers, a heavier allocation to GICs was cited by a meaningful minority, underscoring that many readers view GICs as a conservative, sometimes long-term, option.
GICs sit at the conservative end of the investment spectrum, far removed from highly speculative bets such as meme stocks or crypto. For many households, laddered GICs provide a predictable, reliable portion of a diversified portfolio. In our family portfolio, laddered GICs are the most common fixed-income holding, complemented by dividend stocks and ETFs across taxable and registered accounts.
Given ongoing geopolitical risks alongside inflation uncertainty, retirees in particular can reasonably shelter a significant portion—often 40% to 60%—of their portfolio in guaranteed investments. Retirees generally do not need to chase extra risk to meet income needs, and for that reason some choose to place TFSA or registered plan contributions into five-year GICs, while maintaining equity exposure elsewhere.
Conversely, younger investors still need growth to outpace inflation over the long term. Critics of GIC-heavy strategies argue that guaranteed returns rarely beat inflation over extended periods, especially after taxes—so younger savers typically benefit from a larger equity allocation.
GICs vs. bonds
One alternative to GICs is short-term bonds or high-interest savings, which can offer liquidity and a competitive yield. Some advisors prefer short-term or individual bonds because they provide known principal return at maturity and are less sensitive to interest-rate volatility than bond ETFs. Bond ETFs can fluctuate with rate movements, and while they add diversification, they may not offer the same certainty as holding individual bonds to maturity.
For those seeking yield while protecting purchasing power, the recent rise in interest rates has created opportunities. Bonds and GICs now both offer higher coupon rates than seen in the previous decade, and some advisers call this a “golden time for savers.” The trade-off is timing: locking rates in now could be advantageous if rates fall later, but returns depend on future rate movements that are difficult to predict.
Many advisors recommend a blended approach: maintain a bond or fixed-income allocation that can include bond ETFs, short-term bonds, and a portion in GICs. GICs can be particularly attractive for money needed within a known timeframe, and laddering allows investors to reinvest at prevailing rates as maturities occur.
GICs vs. HISAs
High-interest savings accounts (HISAs) and cash-equivalent ETFs offer liquidity and competitive, though typically slightly lower, yields than fixed-term GICs. They are useful for emergency funds or money that may be needed on short notice. GICs win on the ability to lock in a guaranteed rate, which can be valuable when the investor prioritizes certainty over flexibility.
When investing in a GIC may not make sense
If you may need funds in the near future, GICs can be inappropriate because early withdrawals often incur penalties or are not allowed. For uncertain time horizons, a high-yield savings account or a cash ETF can be a better option. Taxation is another factor: interest income from GICs is taxed at full income rates in non-registered accounts, which can make them less tax-efficient than dividend-paying equities that benefit from dividend tax credits.
Because of tax differences, many investors prefer holding interest-bearing GICs inside tax-advantaged accounts such as TFSAs or RRSPs. That placement preserves more after-tax return and aligns GICs’ predictability with the sheltering benefits of registered accounts.
When GICs are right for retirees
GICs make strong sense for retirees who prioritize capital preservation and predictable income. When both stock and bond markets offer muted returns or higher volatility, a guaranteed-rate instrument that yields 4–5% can be an effective diversifier within the fixed-income slice of a balanced portfolio. If your target allocation is roughly 50/50 stocks to fixed income, placing a meaningful share of the fixed-income portion into GICs is a reasonable, conservative choice.
Advisors caution against locking proceeds from recently sold stocks into GICs if those stocks were sold at a loss. Selling equities after a decline and permanently reallocating to guaranteed products eliminates the chance of recovery. For many dividend-paying companies that have been beaten down, sticking with the stock or gradually rebalancing may lead to better long-term outcomes.
In short, GICs are not a one-size-fits-all solution, but they play a valuable role: providing guaranteed income, reducing portfolio volatility, and protecting purchasing power when used thoughtfully—especially for retirees and those with shorter time horizons.
Read more about GICs:
- What to expect for GICs in 2024
- A guide to guaranteed investment certificates (GICs)
- What is a cashable GIC?
- Six times when a GIC is a smart investment choice
- What is a market-linked GIC?