Market-linked GICs

Market-Linked GICs and Index-Linked GICs link a portion of its return or the total return to the performance of a specified equity market index, the S&P/TSX 60 Index, for example, or to U.S. or other foreign market indexes. In most cases, market-linked GICs are not cashable before their maturity date. Investors should be aware that in most cases, returns from market indexes are capped, and in some cases investors receive only a portion of the investment returns generated by the actual performance of the equity markets. This is known as a “participation factor.”

Another variation on this type of GIC offers returns linked to a mutual fund, such as a dividend fund, managed by the institution selling the GIC.

It is important to note that although the capital for market linked GICs are guaranteed in most cases, it is possible for investors to not have a positive return if the underlying market index did not perform adequately.  Market-linked GICs and Index-Linked GIC returns are linked to performance of the specific indexes.  If the associated index has negative returns or returns that have not hit a benchmark, investors will have a zero return.

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