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Don't delay if you want to lock in a 3% yielding GIC

Safe alternatives to volatile stock markets are starting to look more palatable than they have in a while.

You can now lock in a 3-per-cent return on five-year guaranteed investment certificates sold by online brokerage firms. Yields of 3 per cent have been available for a while now from alternative banks and credit unions, but these players tend not to show up in the lists of third-party GICs sold by online brokerage firms.

Rates on five-year GICs offered by online brokers are mainly between 2.5 per cent and 2.9 per cent. But several brokers showed a 3-per-cent five-year GIC available from HomEquity Bank, and a 3.03-per-cent GIC from Home Trust. These aren't the best rates in the marketplace right now. Oaken Financial, which you have to deal with directly, had a 3.25-per-cent rate on five year GICs at mid-week and EQ Bank offered 3.26 per cent. But there's a big benefit in being able to buy your GICs from the same firm where all your other investments are held.

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One-year GICs are more problematic if you're dealing with a broker. A quick survey of a few firms found a top one-year yield of 2.2 per cent from Home Trust. If you deal with Oaken directly, a much more appealing one-year rate of 2.75 per cent is available.

Here's a handy gauge for judging one-year GIC rates – do they exceed the 2.3-per-cent return available from the high-rate savings account offered by EQ Bank? If not, why lock up your money for a year? The only arguments for doing so are that EQ doesn't offer registered accounts, or that you're willing to accept a lower yield in order to keep all your money at your online broker.

As for that 3-per-cent yield on five-year GICs, don't delay buying in if you're interested. The yield on the five-year Government of Canada bond has been edging lower since hitting a 2018 peak of 2.15 per cent in mid-February. It's widely expected that interest rates will rise in 2018 and beyond, but the pace of economic growth in Canada has been slowing. Slightly lower GIC rates in the near term aren't out of the question.

Personal Finance columnist Rob Carrick encourages the use of robo-advisers to cut through the complexity of getting started investing in Exchange Traded Funds. The Globe and Mail
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