Market-linked GICs designed to fail

Market-linked GICs designed to fail

Market-linked GICs are profitable for banks but consumers get stiffed.


Since the 2008 crash, some investors have turned to market-linked GICs. But one financial institution has ditched these fixed-term investments, which promise a percentage of market gains while protecting principal. “The product is designed to fail,” says Sheldon Dyck of ATB Investor Services in Edmonton. They’re profitable for banks, but complex rules, averaging formulas and exclusion of dividends mean consumers get stiffed. Worse yet, they’re tax-inefficient by converting capital gains to highly taxed interest income. Those seeking stable growth and willing to tie up their money for a few years are better off with a simple balanced portfolio participating in 100% of market returns.

3-year total return with $100 investment*

$114.24  | The S&P/ TSX 60

$106.12 | A regular GIC with 2% interest

$102.14 |  RBC Canadian Market-Linked GIC

*between 2010 and 2013