Personal Finance

Market Linked GICs Question

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  • Jan 21st, 2014 8:26 am
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[OP]
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Dec 23, 2005
2644 posts
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Calgary

Market Linked GICs Question

Do these GICs consider divedends when calculating the growth?

RBC MarketSmart
http://www.rbcroyalbank.com/products/gi ... smart.html

CIBC Market Linked
https://www.cibc.com/ca/structured-note ... grpMLGIC-E

TD Market Growth
http://www.tdcanadatrust.com/products-s ... h-gics.jsp

Canadian Growth ActionGIC
https://www.laurentianbank.ca/en/person ... stissement

i.e. it does simple growth calculations market index at x at the time of purchase then it is at y at time of redemption so total growth percentage (y-x)/x or instead it counts for all dividends (y+dividends-x)/x??

Is there a link that shows real examples with calculations? and I need to buy these directly from banks not through a broker. correct?
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9 replies
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Feb 15, 2008
26318 posts
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Calgary
Unless they say "total return index" or explicitly state the inclusion of dividends somewhere in the phraseology, no, they are not talking about the inclusion of dividends. Only the index price level.
TodayHello wrote:
Oct 16th, 2012 9:06 pm
...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Deal Fanatic
Mar 24, 2008
5717 posts
1834 upvotes
Toronto
With maximum growth at "up to 9% in 3 years", you are better off investing your money elsewhere. Don't bother with these unless you don't care if your money loses to inflation. Take a look at the following article on how to build your own index linked GIC:
http://www.fiscalagents.com/newsletter/ ... ting.shtml
Jr. Member
Oct 27, 2009
143 posts
257 upvotes
Montreal
Also keep in mind that the gains are all in interest. Outside of a TFSA, the overall gain will be taxed at 100% unlike dividends or capital gains. Honestly, If you have the financial capacity to wait for 3 years, you should consider investing into something riskier but more rewarding. A safe mutual fund, should give you on average 3-4% per year, after fees.
Deal Fanatic
Jul 1, 2007
8265 posts
1229 upvotes
The TD one does not include dividends. And yes, considering the risk of making nothing at all if the markets go down, the upside of making 2.7% compounded annually isn't very attractive.
Money Smarts Blog wrote:
Nov 29th, 2010 11:18 am
I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
Sr. Member
Jan 19, 2009
893 posts
32 upvotes
when it says grow to up to 9%, is that referring to Rate of return?

So I invest $10000, and in 3 years I get the maximum return of 9% my investment grows to $10900

But if I invest in lets say a 3 year GIC offering 2.5% then my investment would grow to $10768 giving me a 7.6% return...

whats so good about this market linked GIC stuff?
Sr. Member
Jan 19, 2009
893 posts
32 upvotes
cjottawa wrote:
Jan 20th, 2014 11:47 pm
There isn't, except for the bank.

It's a marketing ploy: make people who are uncomfortable with equity investing who sit on GICs their whole life put money into an investment vehicle that earns the bank more money.

There was another thread on this recently, here: equity-index-powered-gic-1432292/

Read it carefully.
thanks for the link...

was my calculations in my post accurate or am i missing something?
Member
Oct 4, 2008
277 posts
27 upvotes
London
ksgill wrote:
Jan 20th, 2014 1:32 pm
With maximum growth at "up to 9% in 3 years", you are better off investing your money elsewhere. Don't bother with these unless you don't care if your money loses to inflation. Take a look at the following article on how to build your own index linked GIC:
http://www.fiscalagents.com/newsletter/ ... ting.shtml

how to you pick your own gic linked to the market? do corporations offer these?

the only gic's i've seen are the ones from banks, and trusts.
Deal Fanatic
Mar 24, 2008
5717 posts
1834 upvotes
Toronto
proteinJunkie wrote:
Jan 21st, 2014 12:26 am
how to you pick your own gic linked to the market? do corporations offer these?

the only gic's i've seen are the ones from banks, and trusts.
Click on the link, it tells you how to create one yourself.

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