What’s the Difference between GIC Maturity and Segregated Fund Maturity?

GIC’s & Segregated Funds both have “Maturity Dates/Guarantees”.  When it comes to your investment these Maturity Guarantees mean totally different things… which is confusing.  Let’s clear this up.

What is the Difference between GIC Maturity and Segregated Fund MaturityA GIC Maturity refers to the term length of the agreement between the financial institution and the investor’s deposit. For Instance, If an investor purchases a Non-Redeemable GIC with a 5-year Maturity, the investor will not have access to his/her funds deposited for that 5-year Term. In exchange the investor receives a locked in interest rate applied to the deposit guaranteeing the dollar value at the end of maturity. It’s important to note that there are variations and some GIC’s can be cashable – normally at the expense of the consumer. Always read the fine print and speak with your advisor to ensure you have a clear understanding and are comfortable with taking on the liquidity risks prior to your deposit. 

A Segregated Fund Maturity Guarantee operates very differently.  It’s really more of a safety net feature for the investor and allows you to withdraw your deposits at any time, offering liquidity.  

This maturity guarantee operates as insurance for the investor’s original deposit against market volatility. At the time of maturity the investor is guaranteed to have a value of at least 75 or 100% of the initial investment. This feature comes into effect when the Market Value of the deposit has dropped due to market volatility. Thankfully for Segregated Fund Investors, Maturity Guarantees rarely get used as the market value of investors deposits have traditionally increased by the time Maturity dates come up but it certainly is a feature you’d rather “have and not need” than “need and not have”. 

Basically, a GIC Maturity refers to the amount of time your money will be locked in. A Segregated Fund Maturity is the amount of deposit protected against market downturn; while in the markets aiming for higher gains.

It is always important to speak with an advisor prior to selecting which Investment products best fit your objectives. Sometimes products have the same named features, but can have very different applications.  Bowie Can Help.

– Kris Alary PFA®

Investment, Insurance & Estate Advisor