“They made a deal and they liked the deal, until they had to pay the price.” – Brent Weeks

In the current economic environment, buying GICs can feel like making a deal with the devil.  With interest rates at lows, with little to no projection to increase in the near term, what is the real price you pay to guarantee and lock in your return?

1 to 5 Year GIC Rates Currently Available

*NATCAN Trust as at July 17, 2020

As of July 17, GIC rates fall between 0.50% and 2.00% while locking in your money from 1 to 5 years. Inflation by definition is “a general increase in prices and fall in the purchasing value of money”. Inflation is targeted at 2% for the long term – meaning on average the yearly price of goods you purchase will increase by 2% per year. With the rates of GICs being low, the real return after inflation at 2% is negative to flat across the board (GIC return – Inflation).

From Brent Weeks’s quote above, investing in GICs seem like a deal someone would like, until they pay the price. Real rates of return with inflation at 2% will fall between -1.50% for a 1 year GIC to 0.00% every year for 5 years in 5 year GIC.

There are options to generating returns in different asset classes while participating in the rebound of the global economy. We feel that active management is as important as ever to generate a positive real return within an investment portfolio.

Tom Stachiw, CIM
Portfolio Manager

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Founded in 2006 to manage and service seven family offices, today Matco offers the benefits of our extensive investment management experience to individual investors, foundations, endowments, condominium corporations, trusts, corporations and not-for-profit organizations.

Our mission is to simplify the investment world for our clients by understanding their needs and providing exceptional investment solutions that preserve and grow capital.

Matco Financial is an independent, privately held discretionary investment counsellor and asset management firm that serves the needs of individual investors, institutions, advisors, trusts, corporations and not-for-profit organizations. Matco provides investment advisory services to investors on a discretionary basis through mutual funds and separately managed accounts. This communication is intended for information purposes only and does not constitute an offer or solicitation by anyone in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Matco Financial Inc. makes no representations as to the accuracy or any other aspect of information contained in other websites. All statements that look forward in time or include anything other than historical information are subject to risks and uncertainties and are not guarantees of future performance. Investors should not rely on forward looking statements. Actual results, actions or events, could differ materially from those set forth in the forward looking statements.

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