1. A lost decade for GICs
INVESTING CONCEPT
4%
1-Year GIC Average After Tax After Inflation
3%
2%
1%
Many Canadian investors turn to Guaranteed Investment Certificates (GICs) looking for safe,
stable income. However, low interest rates, taxes, and inflation have meant the real return on
an average one-year GIC has actually been negative every single year over the past decade as
0%
shown in the chart. As a result, if you invested in a GIC, after taxes and inflation, you actually
lost ground.
-1%
This is why having a diversified portfolio with a range of asset classes is essential. Including a
portion of equities in your portfolio can protect your purchasing power and help grow your
-2%
wealth over time. As an example, the ten-year return for Canadian equities as represented by
the S&P/TSX is 6.21% for the same timeframe.
-3%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Based on Bank of Canada’s average one-year GIC rate, tax rate of 46. 4% for Ontario and the annual rate of inflation.
Source: Investors Group Portfolio Analytics
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“A lost decade for GICs” © Investors Group Inc. 2011 C3815 (02/2011)