Are GIC ladders still a viable strategy in these times?

It depends on your financial situation and goals. Inflation, while a factor, shouldnt be the determining reason whether to invest or not. Do you need cash in the near term? Do you want to be invested with less equity exposure etc?

Remember bonds are a bit risk in the short term. With interest rate rises, they have dropped especially bond funds. This in itself is risky.

If the investments are for long term, stick mostly to your investment allocation plan. If GICs were part of it, go for it. If you don't need the money in any short term, you can consider a heavier weighting in equity investments.

Personally I own GICs, but I dont consider them my investments, but just savings to access later.

Similar to you I hold about 2 months of salary in a 5 yr GIC ladder as part of a larger emergency fund

jgaleazza wrote: ↑ As the topic states. Current 5 yr GIC rates are around 2.5-2.7%. With inflation in Canada hovering around 5% and likely expected to stay that way does it make sense to park some funds in a GIC ladder vs other investing options (investing in dividend stocks for ex)

I personally use the ladder approach for the percentage of my portfolio that I have in GICs. I also stagger maturity dates.

That being said, I hold a very low percentage of my portfolio in GICs... and even in terms of the percentage of my income holdings, my GIC holdings is still low.

jgaleazza wrote: ↑ As the topic states. Current 5 yr GIC rates are around 2.5-2.7%. With inflation in Canada hovering around 5% and likely expected to stay that way does it make sense to park some funds in a GIC ladder vs other investing options (investing in dividend stocks for ex)

Oaken and EQ are both around 3.2% 5 years.
I'm 9 years into a 5 laddered GIC approach and very happy with this part of fixed income.
Only deviation was February matured GIC, which was set to roll over for 5 year renew at 2.6%. I suspected rising rates, so did a 3 month 1.6%, and in May rates should be 3.2 or possibly more. Will renew 5 years.

oriley wrote: ↑ Oaken and EQ are both around 3.2% 5 years.
I'm 9 years into a 5 laddered GIC approach and very happy with this part of fixed income.
Only deviation was February matured GIC, which was set to roll over for 5 year renew at 2.6%. I suspected rising rates, so did a 3 month 1.6%, and in May rates should be 3.2 or possibly more. Will renew 5 years.

More important in these times than ever for those who are approaching or in retirement and need to preserve principal with little or no risk.

Anyone in a high or even moderate risk leveraged portfolio has seen a 15% to 20% reduction in value since November highs. Hell, losses are 5% JUST LAST WEEK. If Russia goes on full tilt Monday, the markets may have another few weeks or even months to bottom. Overall losses will likely be up to 50% in tech and crypto.

Suddenly 4% (highest promo gic right now) guaranteed gains for part of your retirement looks pretty attractive. If you are at or in retirement, it's ESSENTIAL vs huge losses. Your expected lifespan should dictate how much of your portfolio should be low risk. Assuming an average lifespan of 70 years and entering the workforce around age 20:

50+ years zero gic
40+ years under 10%
30+ years under 20%
20+ years under 30%
10+ years under 40%
Under 10 years under 50%

Once you hit age 70 you should be holding an even split 50/50 of moderate/low risk investments. That way even a crash for the ages leaves you enough to survive until your end of days, and even leave some nest age to your children or grandchildren.

Just retiring & my next 3 years of the self-funded portion of my pension top ups are GICs (3 yr GIC ladder) @ BMO Investorline RRSP:
GICs from a few days ago (annual interest):
3 yr from Concentra Bank @ 3.8%
2 yr from Equitable Bank @ 3.61%
1 yr from Laurentian Bank @2.94%

6 months ago:
3 yr from Equitable Bank @ 2.01%
2 yr from Equitable Bank @ 1.73%
1 yr from Equitable Bank @ 1.21%

I consider the premium paid (losing to inflation) a reasonable cost to keep my money safe.

If the market performs reasonably well, I'll decumulate from the RRSP/RRIF, otherwise I'll redeem the GIC at maturity (and top up the GICs later).

Meanwhile my CLF ETF (iShares 1-5 Year Laddered Government Bond Index ETF) is down about -5% over 12 months. LOL so much for me thinking that GICs were old-fashioned (goodness)

I have a ladder mostly in the 1 to 3 yr range. The goal being to roll over at higher rates at maturity, in an inflationary environment where rates are increasing. This is in my RRIF, to avoid having to sell stocks for income when the market going down.

It is not mandatory that GIC ladders are 5 years. If you are planning for minimum withdrawals from a RIF, you could defer buying until December or when/if rates start to go down.

Just reading the rates from the original post in March should be a warning how you can be locked in when rates and inflation keep going up.

jgaleazza wrote: ↑ ... vs other investing options (investing in dividend stocks for ex)

The dividend stock ETFs that I checked are down to varying degrees, depending of course on which stocks they hold. So right now, in general, I would be buying these rather than GICs

Crypto 100x

BiegeToyota wrote: ↑ Crypto 100x

If you want to lose everything, then hell yeah

BiegeToyota wrote: ↑ Crypto 100x

You're a real piece sometimes. Are you just trying to get people bankrupt or are you trying to be funny?

I was trying to be funny

akaManny wrote: ↑ The dividend stock ETFs that I checked are down to varying degrees, depending of course on which stocks they hold. So right now, in general, I would be buying these rather than GICs

The are down so you should buy them? They are falling because a 4% dividend with risk is no longer so attrattractive when fixed income is 3.5%. Also the risk. A housing crash might dent bank earnings and hence dividends. 10, 20% chance ?

fogetmylogin wrote: ↑ The are down so you should buy them? They are falling because a 4% dividend with risk is no longer so attrattractive when fixed income is 3.5%. Also the risk. A housing crash might dent bank earnings and hence dividends. 10, 20% chance ?

Go do a search on bank dividends and tell me when was the last time any of the 5 majors banks did not pay a dividend. Let me help you with that search. There was no dividend cut in 2020 or during the GFC. In fact the dividend generally grows at an attractive rate to inflation. It was only due to government mandate that there was no dividend increase in 2020. The banks generally did a bit of catch up in 2021, BMO raised the dividend by over 25%. As for short term share price, it ebbs and flows with market sentiment. Dividend investors buy dividend stocks to harvest the dividend not to trade the equity. If RY share price falls tomorrow, buy more if you have the money. On an ongoing basis the dividend is safe and that is what really matters most.

https://www.dividend.com/how-to-invest/ ... companies/

Did you ever research dividend tax efficiency? Let me help you with this one as well. Look at that, the marginal tax rate for eligible dividends is negative up to ~$50,000 taxable income. It is nice to collect up to $50,000 of eligible dividends yearly and pay no tax because the tax is paid for by the company. So would you rather have 4% in eligible dividends or 4% in interest income?

https://www.taxtips.ca/taxrates/on.htm

Finally, in the long term equity price offers inflation protection. Take a look at the value of $10,000 invested in the 3 largest banks would be worth a quarter century later. How much is $10,000 in 1996 worth today?

https://www.portfoliovisualizer.com/bac ... ion3_3=100

akaManny wrote: ↑ The dividend stock ETFs that I checked are down to varying degrees, depending of course on which stocks they hold. So right now, in general, I would be buying these rather than GICs

The concept of buy low, sell high makes sense to everyone except when it come time to execution.