Personal Finance

Estimate return on GIC

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[OP]
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Dec 28, 2010
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Estimate return on GIC

Is there a way to make an estimate of the return on a TD Canada Trust Market Growth GIC ?

It matures soon and the bank's employees are almost calling me every day to make an appointment so they can relocate the funds at maturity. I have asked multiple times how the GIC was doing but they won't say and online I can't see anything so I will find out how well TD Trust has done for me Smiling Face With Open Mouth.
Do you want to meet the love of your life? Look in the mirror. | Byron Katie
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Feb 1, 2012
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You could but you would have to know which index your GIC follows, and what the conditions and limits are. Most market index GICs follow some index, like the S&P TSX60, or S&P TSX Bank Index. Then there is usually a minimum and maximum percentage return. And some older market GICs only return a percent of the index return.Your contract when you bought the GIC should state those things.

See here for what TD is currently offering: https://www.td.com/ca/en/personal-banki ... et-growth/

Then you would have to find the change in the index (excluding dividends) over the term of the GIC. TMX Money (www.tmxmoney.com) has index history. Here is history for the TSX 60 index. Set the start and end date and see the change in price. https://web.tmxmoney.com/pricehistory.p ... ol=%5ETX60

As you can see you could estimate it, but would take some searching to find the right data for the index your GIC tracks.

For a public service announcement, many investors do not like these things. The returns are obscure. They only pay return on the price change of the index, not the total return including dividends. The return is taxed as interest, not the lower capital gains tax rate. If you don't mind a bit more risk, a balanced ETF will likely give a better return. Or a regular GIC from an online bank like Oaken would give a guaranteed return.

May you have a happy and prosperous new year. :)
I solemnly swear, to never assume I have an inkling at which direction the market will head, and to never make any investments based on a timing strategy.
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Thank you very much ! I found the link to the TD website as well, worst case scenario I'm looking at around 2.7%/year

Deepwater wrote: For a public service announcement, many investors do not like these things. The returns are obscure. They only pay return on the price change of the index, not the total return including dividends. The return is taxed as interest, not the lower capital gains tax rate. If you don't mind a bit more risk, a balanced ETF will likely give a better return. Or a regular GIC from an online bank like Oaken would give a guaranteed return.

May you have a happy and prosperous new year. :)
So yeah, I should have mentioned that at the time the bank rep responded to my emotional state. My mother had passed away and she had saved up money for my children's education. I said something as 'I don't want to loose this money' and so he suggested the GIC. Of course, later I regretted the decision.

I love the Oaken suggestion, I looked at it before!

Thanks very much, hope you have a great new year as well
Do you want to meet the love of your life? Look in the mirror. | Byron Katie
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@VESTEGAARD Markets have done very well in the past 3-5 years so you should get more than the minimum.

Here are a couple of links for GIC rates. If you go for GICs make sure it is insured either by CDIC or a provincial credit union.
https://www.highinterestsavings.ca/gic-rates/
https://www.ratehub.ca/gics
I solemnly swear, to never assume I have an inkling at which direction the market will head, and to never make any investments based on a timing strategy.
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Jul 15, 2009
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Deepwater wrote: You could but you would have to know which index your GIC follows, and what the conditions and limits are. Most market index GICs follow some index, like the S&P TSX60, or S&P TSX Bank Index. Then there is usually a minimum and maximum percentage return. And some older market GICs only return a percent of the index return.Your contract when you bought the GIC should state those things.

See here for what TD is currently offering: https://www.td.com/ca/en/personal-banki ... et-growth/

Then you would have to find the change in the index (excluding dividends) over the term of the GIC. TMX Money (www.tmxmoney.com) has index history. Here is history for the TSX 60 index. Set the start and end date and see the change in price. https://web.tmxmoney.com/pricehistory.p ... ol=%5ETX60

As you can see you could estimate it, but would take some searching to find the right data for the index your GIC tracks.

For a public service announcement, many investors do not like these things. The returns are obscure. They only pay return on the price change of the index, not the total return including dividends. The return is taxed as interest, not the lower capital gains tax rate. If you don't mind a bit more risk, a balanced ETF will likely give a better return. Or a regular GIC from an online bank like Oaken would give a guaranteed return.

May you have a happy and prosperous new year. :)
Is the wording on that website even legal?

For example, for the TD Canadian Top 60 GIC, it says:

"Guaranteed Minimum Interest Return is 5.00%3. Interest rate is per annum."

But if you click on the 3, it says:

"3 Actual return is 0.9816% per annum, compounded annually, payable at maturity (equivalent to 5.00% total return)"

So the non-fine-print is a lie. It suggests 5% per annum, but it's really 5% per 5 years or 0.98% per annum. How is it legal for a bank to falsely advertise like this?

Oh, and the maximum return is 12% over 5 years, which works out to 2.3% annually. A decent HISA will pay more than the maximum possible with this GIC, even if the market goes straight up.
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bubak wrote: Is the wording on that website even legal?

For example, for the TD Canadian Top 60 GIC, it says:

"Guaranteed Minimum Interest Return is 5.00%3. Interest rate is per annum."

But if you click on the 3, it says:

"3 Actual return is 0.9816% per annum, compounded annually, payable at maturity (equivalent to 5.00% total return)"

So the non-fine-print is a lie. It suggests 5% per annum, but it's really 5% per 5 years or 0.98% per annum. How is it legal for a bank to falsely advertise like this?

Oh, and the maximum return is 12% over 5 years, which works out to 2.3% annually. A decent HISA will pay more than the maximum possible with this GIC, even if the market goes straight up.
Note the subtle difference between "interest return" and "interest rate". Interest return refers to the total over the period of the GIC. Interest rate is the annual rate. Legal? TD must think so. Misleading? Absolutely!

Yeah, these things only look good compared to the big banks posted rates. You can get a GIC from an online bank or credit union for a better rate than the big banks. Or you can buy one of these products and hope to get a bit more than an online bank, but possibly much less. Too many people trust their big 5 bank and take whatever is offered.

Banks are not in business to make money for their clients. They are in business to make money from their clients. Remember that in every interaction and transaction. Always ask for a better rate. Always look around for a better deal.
I solemnly swear, to never assume I have an inkling at which direction the market will head, and to never make any investments based on a timing strategy.
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Jul 1, 2007
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Everything about these types of GICs is scuzzy. Just avoid them, and if any bank salesperson even suggests them as an option, run. You're not being advised, you're being sold to. The salesperson isn't acting your best interest, they're acting in the bank's best interest.
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
[OP]
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Dec 28, 2010
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So we have made an appointment with TD bank. Previously we have told them that we want the funds from the GIC to flow over in an RESP.

Why would the bank call us so many times about this maturing date? Would the money not automatically be put in our chequing account, so that we can distribute it ourselves?

Is there a better way than putting the monies into an RESP?
Do you want to meet the love of your life? Look in the mirror. | Byron Katie
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Jul 1, 2007
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VESTEGAARD wrote: Is there a better way than putting the monies into an RESP?
Better than what? What are you aiming to do?
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
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Mar 22, 2010
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VESTEGAARD wrote: Why would the bank call us so many times about this maturing date? Would the money not automatically be put in our chequing account, so that we can distribute it ourselves?
It does not. For RBC, it goes automatically into 1 year non-cashable GIC if you don't respond. They try like 3 attempts and if there is no response, you deem to agree your expiring GIC into a new GIC.
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rapashoo wrote: It does not. For RBC, it goes automatically into 1 year non-cashable GIC if you don't respond. They try like 3 attempts and if there is no response, you deem to agree your expiring GIC into a new GIC.
Sorry to say that this was not the case with TD. In total in 4 four weeks leading up to the maturity date I counted 14 calls from 5 reps, one rep twice on the day that we had already visited the bank for the transfer.

Yes, they tried to keep the money with TD Trust. We got the full % per year, I'll give them that.
Do you want to meet the love of your life? Look in the mirror. | Byron Katie
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May 17, 2010
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rapashoo wrote: It does not. For RBC, it goes automatically into 1 year non-cashable GIC if you don't respond. They try like 3 attempts and if there is no response, you deem to agree your expiring GIC into a new GIC.
That's not true. At purchase time, you have the option of what happens at maturity, deposit into the account or reinvest.
Even if you chose to reinvest, with a phone call that can be changed to cash.
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Mar 22, 2010
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bunget wrote: That's not true. At purchase time, you have the option of what happens at maturity, deposit into the account or reinvest.
Even if you chose to reinvest, with a phone call that can be changed to cash.
I think you misunderstood. Yes, you have option to choose whatever vehicle you want your expired investment to be put into but IF you don't respond, RBC will put it into 1-year non-cashable GIC. (source: experience)

If you communicate, you have every option to choose from.
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May 17, 2010
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rapashoo wrote: I think you misunderstood. Yes, you have option to choose whatever vehicle you want your expired investment to be put into but IF you don't respond, RBC will put it into 1-year non-cashable GIC. (source: experience)

If you communicate, you have every option to choose from.
I do apologize if my reply was too harsh.
If at purchase time, you tell them you want the money to be deposited back into you account, than no further action is needed.
If you didn't tell the banker, and he/she will not set any instructions, it will be indeed renewed, if they can't reach you. However, even if this happened, you can redeem it before maturity.

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