Cash and cash equivalents are considered one of the safest types of investments. They’re ideal for short-term goals, emergency savings, or when you want to keep part of your portfolio safe from market ups and downs.
These investments are easy to access, carry low risk, and offer modest returns. They’re often used as a starting point for new investors or as a way to balance riskier investments.
Guaranteed Investment Certificates (GICs) are an example of a security found in this asset class.
GICs are deposits made at a bank, trust company or credit union for a fixed period of time -- anywhere from 30 days to 10 years. When the term ends (called “maturity”), you receive your original investment plus interest.
There are two main types:
Interest-bearing GICs – Pay a fixed rate of interest until maturity.
Index-linked GICs – Returns vary based on the performance of a market index, such as a stock market index.
Most GICs must be held until maturity. Some may allow early redemption, but this could result in penalties or reduced returns.
GICs are guaranteed by the issuer (such as a bank or credit union). In addition, your principal (your original investment amount) may be insured up to certain limits by deposit insurance agencies like:
Note: If your GIC is index-linked, there is a risk that interest payments may be lower than expected, or there may be no interest at all.
Risk level: Low
Return potential: Modest
Liquidity: Limited. Most GICs require holding to maturity
Insurance: Principal may be protected by deposit insurance, depending on the issuer and coverage limits
Use case: Suitable for short-term savings or conservative investment strategies