Benefits of Laddering GIC Maturities
Developing a laddered maturities plan can be an easy way to help you maximize GIC returns while maintaining a secure portfolio. This proven method of investing (also known as a laddering strategy) can help you reduce the risk of interest rate fluctuations and increase your portfolio's overall return.
Laddering maturities can be achieved by:
- dividing the amount you are planning to invest by 5 (e.g. $10,000.00 equals five investments of $ 2,000.00 each
- equally investing in five GICs of one- to five-year terms (e.g. $2,000 in a one-year GIC, $2,000 in two-year GIC,…$2,000 in five-year GIC).
As a result, 20% (1/5th) of your portfolio will mature each year. This can be cashed, or reinvested for five years at the then prevailing rate. This strategy locks in the portfolio for higher long-term rates, yet also provides liquidity.
It is often difficult to predict future interest rate trends, but laddering maturities provides a strategy for maximizing return while minimizing risk.
| Your goal |
Action plan |
| To reduce interest rate risk |
Begin by spreading the maturity dates so that one or more certificates (and approximately 20% of your GIC portfolio) comes up for renewal each year for the next five years |
| To increase rate of return |
Every time a certificate comes up for renewal, reinvest it as a 5-year GIC. Work toward a portfolio of laddered 5-year GICs with some renewing each year, so that you receive the higher long-term rates |
* Laddering strategies are ideal for shorter time horizons too. If your needs are for the shorter term...The key is to spread out your investments and maximize your return over your preferred time horizon.
Visit your branch and use our interactive Laddering Tool to create your customized GIC portfolio.
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