Is there a place for a Guaranteed Investment Contract in a diversified portfolio? What is your opinion on GIC's? I recognize the devil is in the details however, I question why this subject has not gotten enough press? Has the insurance industry changed?
Thank you in advance.
GIC's
Re: GIC's
My employer got rid of our GIC a few years ago stating that there were risks in these products. The were replaced by a set of bond funds with specific maturity dates like 2018, 2020 and 2022. I remember that when I started working there in '94 the guaranteed rate was always greater than the 10 year treasury. In late 1999 when the market was going gangbusters I transferred all my equity positions in my 401k to the GIC which at that time had an 8.5% rate of return. Nowadays, with out that option I am not tempted to jump in and out of the markets so that's one plus. If I had that option today I would use it as part of my fixed income allocation. Maybe 50% total bond and 50% GIC. You do miss out on any capitol gains if interest rates fall though which total bond has given you through the years.
Re: GIC's
I use our GIC fund for 1/3 of my fixed allocation, along with Inflation Protected Securities VIPSX, and Intermediate Term Bond VBILX. It's what I use as a pseudo money market to store my "safe" money. It is of course not completely safe, but enough so for my needs.
Regards |
Bob