# Market Linked GICs



## Jets99 (Aug 26, 2011)

Anybody buy these? Opinions?

Have done some reading and looking at the fine print on how calculations are done. General consensus seemed to be they are good for the banks. 

I am within 5 years of retirement and moving towards protecting capital. Have been slowly decreasing my market exposure but looking for alternatives to lousy returns of current GICs.

My mattress is stuffed and I need to do something...


----------



## AltaRed (Jun 8, 2009)

These have been discussed a number of times. Look at the specific fine print and do the math on a couple scenarios. You typically only get original capital back if the markets do not perform well, and you are limited on the upside. Me thinks you are much better off with an equity ETF for the 'market' part and a vanilla GIC for the fixed income part.

Added: Rule of thumb... the more complicated a product is, the more likely it is designed to confuse the investor and provide more fee income to the vendor.


----------



## Jets99 (Aug 26, 2011)

Thanks but I already have all of the market exposure that I will tolerate at this point so buying more equity ETF is not an option. And I have vanilla GICs. 

I am looking for alternative fixed rate products to GICs that have potential for more than 2%. Maybe better chance finding that unicorn ior Sasquatch or leprechaun.


----------



## cainvest (May 1, 2013)

How do the market linked GIC rates you're looking at compare (on the GIC part, not the potential market side) to a regular GIC?


----------



## AltaRed (Jun 8, 2009)

Jets99 said:


> Thanks but I already have all of the market exposure that I will tolerate at this point so buying more equity ETF is not an option. And I have vanilla GICs.
> 
> I am looking for alternative fixed rate products to GICs that have potential for more than 2%. Maybe better chance finding that unicorn ior Sasquatch or leprechaun.


The point being is market linked GICs do have exposure to the equity market. Using CIBC as an example, the only way you get any interest is for the equity market to be positive over the next 5 years. And if it is really good, e.g. a 50% increase, you only get half of that, i.e. the ceiling on the market linked GIC is a 25% gain over the 5 year period. If the equity market tanks, you get zero interest. You are willing to risk a 0% return on your GIC investment? 

You pay a heavy price just for capital protection. The bank is gambling on equity markets doing better than 5% annually, in order to collect money (insurance) to cover the example where equity markets sink over the next 5 years and they have to dig into their own pockets to give you your capital back. These kind of GICs may appeal to very conservative investors well into their retirement and cannot afford capital losses. They are willing to risk 0% in return for a potential 25% interest over the 5 year period.

There is nothing wrong with 'rolling your own' as you already are with equity exposure and GIC exposure. If you have been operating a 5 year GIC ladder over the last several years you are getting close to 3% in aggregate at this time, albeit it will come down as your current 5 year GICs are maturing, e.g. a new 5 year GIC is only 2.6% at the discount brokerages.

Alternative fixed rate products currently paying more than a 5 year GIC include investment grade (AAA through BBB) Corporate bonds. I believe BMO's md-term corporate bond ETF ZCM is paying circa 3.5-4% yield after MER. There are several other options in that space.


----------



## andrewf (Mar 1, 2010)

If you already have all the equity exposure you want, why are you considering equity linked GICs?


----------



## james4beach (Nov 15, 2012)

I agree that these generally are not good products.

They're meant to attract you to a seemingly nice balance between risk and reward ("play the stock market with no risk") but actually offer you a poor risk/reward tradeoff. You can't get the full stock market performance so you're paying a big penalty for the "safety".

If you want stock market experience with reduced risk, the correct way to do it is to hold a mix of cash/fixed income and stocks. For instance a laddered GIC portfolio, plus your stock indexes (or ETFs). You want less stock market risk? Reduce your stock holdings and boost your cash/GICs.


----------



## Jets99 (Aug 26, 2011)

Yikes sorry for long post! Thanks for the responses. James4beach and a few others have pointed out the 'roll your own' alternative is best and to just simply hold a balanced portfolio of stocks and fixed income. I get that part and that's what I'm doing at the present time. My mix is now at 65/35. Within my 65% fixed holdings I am exploring options other than GICs and bonds. That's why I am looking at this product and I don't want to increase my market exposure beyond 35% at this point.

It's a difficult balancing act trying to preserve capital now but also to maintain enough growth overall to actually achieve a retirement plan within five years.

I do hold some Preferred shares and I'm also looking at more of those too. The 4 to 5% dividends on them are attractive but that's another discussion and I've seen the threads on preferreds and the debate on whether those should be truly classified as fixed or not. At the stage I am at I would not consider them to be part of my fixed portfolio but somewhere between fixed and equities when considering risk. 

cainvest
The market linked GICs I am considering pay anywhere from 0 to 20% depending on how the market does during the term of the product. They guarantee my initial investment is protected but no guarantee on any rate of return.

Rikk
I have looked at GIC laddering but fundamentally you are still only getting GIC rates which are less than 3%. I have been buying vanilla GICs plus keeping some in Steinback credit union savings account at 2% which keeps some liquid and the rate is not much different than a GIC. 

andrewf
In my first post I said my objective was to protect my capital. I realize this is equity exposure but my capital is guaranteed. 

Altared
As I said, I realize there is market exposure but Since my initial investment is protected I would consider this to fixed income product. I agree I would be sacrificing potential better gains in the market but I would also be avoiding potential large market corrections which I can't tolerate beyond my 35% market exposure already. 

Bottom line for me is if I can protect my initial investment and possibly get more than 2% rate of return I am very interested in the product. At this point though I don't know if that's possible with this product and I need to read some more. 

And still wondering, has anyone out there ever purchased a market linked GIC and if so which one, and how did it work out for you?


----------



## fatcat (Nov 11, 2009)

what a lot of fuss over nothing ... you need to resolve the irrational ideas in your head

you have your equity market exposure ?
then just go buy your guaranteed fixed exposure (gic's) and be done with it

there is always a price to be paid for everything, if market linked gic's were just as good as plain vanilla gic's we would all be buying them but they aren't because if the market tanks you just get your principal back whereas with a plain gic, you get your 2% which will do well to offset any equity pullback

let me know when you find sasquatch, because that will make you more than any old gic


----------



## cainvest (May 1, 2013)

I did buy a linked GIC way back, in 90's IIRC, with part of my fixed income allocation and it worked out well with a much higher return than a normal GIC would have given me. At that time though I believe the penalty was not as great as they are dinging you now. The only way I'd look at these is if they offered a near regular GIC rate in addition to a capped the market upside. In other words, if they offered a guaranteed yearly 2.25-2.4% 5 year linked GIC with a capped 25% maximum market gain, I'd be somewhat interested. Of course with many markets testing new highs right now it may be a case of bad timing.


----------



## SkyFall (Jun 19, 2012)

think about this 2 second, the range of return is 0% to 20% (according to the numbers you provided), but it's a potential 20% return on 5 years which mean it's like a annual return of 4%. For only 2% compare to a plain vanilla GICs you will put your money at risk for 0%. 

Someone said that a AAA bond from BMO is 4% return after expenses.....


----------



## Canadian (Sep 19, 2013)

Shouldn't inflation be considered as well? If the markets don't perform you don't actually have the capital protection - the real rate of return would be negative IMO, not zero. According to Google Finance, today's rate of inflation is 1.5% (though I believe the rate of inflation for many everyday expenses is higher - but this is for a different thread). If we agree to use 1.5% inflation in this example - a 5-year market linked GIC that earns "zero" return would actually cause you to lose 7.5% of your capital in terms of purchasing power.

At least with a plain-vanilla GIC the rate of return should match or slightly exceed inflation. The 2.5% offer with Tangerine right now seems even more attractive, considering the funds remain liquid.


----------



## AltaRed (Jun 8, 2009)

SkyFall said:


> Someone said that a AAA bond from BMO is 4% return after expenses.....


I didn't say that. I said that a BMO Corporate Bond ETF with a range of AAA to BBB bonds is currently yielding something in the order of 3.5-4%. IIRC, the bulk of the bonds are in the B to BBB category with some in the A+ category. Capital is not guaranteed of course in any bond ETF but if it is held to its duration of circa 6 years I believe, one will do all right regardless of interest rate changes. 

As others have said, to do better than a vanilla GIC, one has to take some risk. A market linked GIC has risk, i.e. the risk of getting less than 2.6% on a current 5 year vanilla GIC.... and one with a 20% cap after 5 years is less than 4% compounded annually (not guaranteed). Hard to know if that is a better risk than the BMO Corporate Bond ETF I referred to above.

In fairness to the OP, s/he is looking for an alternative (incrementally) to the equities, prefs and vanilla GICs s/he now holds. That is understandable. I just don't think the OP has looked at the competitiveness of market linked GICs versus products like Corporate Bond ETFs.

P.S. to the OP: I agree prefs are equities and can (but not necessarily) behave like equities especially in Pfd-1 and Pfd-2 (investment grade) categories (such as some of the insurers like GWO and SLF and big utilities like CU, FTS, ENB, TRP). It is when you get to Pfd-3 and below (sub-investment grade) such as PPL and ALA prefs that they behave just like their equity brethen.

Added: I would more likely consider market linked GICs for some elderly retirees (80s and 90s) that restrict themselves to investing with their bank branch and need to have a bit of a yield boost above the bank paltry vanilla GIC offerings, will not revert to eating dogfood with the downside risk of a 0% return over 5 years, and should not be sold MER heavy mutual funds. I don't see them as being necessarily attractive for someone who is not yet (or just entering) retirement and is actively managing their accounts.


----------



## SkyFall (Jun 19, 2012)

my bad I misread it hahahah


----------



## the-royal-mail (Dec 11, 2009)

Simple math reveals these are a terrible product. We had some past discussions about the RBC ones. Worth your time to look up the thread.

It doesn't make sense to me that you would be looking for more growth beyond the 1-2% of GICs, at this stage in your life. Doing this means you will be taking greater risk. Why do that? What's wrong with 1-2%?


----------



## brad (May 22, 2009)

the-royal-mail said:


> What's wrong with 1-2%?


The inflation rate in Canada was 1.50 percent in March, 2014. The average inflation rate in Canada from 1915 to 2014 was 3.21 percent.


----------



## Canadian (Sep 19, 2013)

brad said:


> The inflation rate in Canada was 1.50 percent in March, 2014. The average inflation rate in Canada from 1915 to 2014 was 3.21 percent.


If the GIC's return approximately equals inflation then the investor's purchasing power is preserved at the time the GIC matures. If the market doesn't "perform" and a 5-year market linked GIC returns 0% then the investor loses 7.5% of their capital in terms of purchasing power (using 1.5% as the inflation rate).

I think the assumption made is that the investor has enough saved for retirement and therefore does not need a high ROI. In this case, the goal should be capital preservation, which IMO is uncertain with a market linked GIC.


----------



## nobleea (Oct 11, 2013)

These Market-linked GIC's usually get pushed/marketed hard after the market has had a few years of above average returns (as is the case now).
I'm sure if you did a study of average return of dollars invested in these things, it would be lower than a standard plain jane GIC.


----------



## brad (May 22, 2009)

Canadian said:


> I think the assumption made is that the investor has enough saved for retirement and therefore does not need a high ROI. In this case, the goal should be capital preservation, which IMO is uncertain with a market linked GIC.


Retirement isn't like flipping a switch, though: if you're lucky you'll live 30 years or more in retirement. Keeping everything in GICs for those 30 years is basically like telling someone in their 30s to invest everything in GICs. You definitely want to preserve capital, but you also want to beat inflation over the long term. You'll be withdrawing some of that money in your 80s and 90s if you live that long, and inflation can really eat away at your nest egg over that period.

I'm not at all advocating market-linked GICs. My own plan is to keep a good portion of my retirement investments in equities after I retire, just boosting the fixed-income percentage.


----------



## Canadian (Sep 19, 2013)

nobleea said:


> These Market-linked GIC's usually get pushed/marketed hard after the market has had a few years of above average returns (as is the case now).


+1

This is a very good point. I only saw my bank really start pushing these last year - when the TSX was 50% higher than it was 5 years before then. The time to invest in one of these (if any) would have been in 2008/2009.


----------



## Canadian (Sep 19, 2013)

brad said:


> Retirement isn't like flipping a switch, though: if you're lucky you'll live 30 years or more in retirement. Keeping everything in GICs for those 30 years is basically like telling someone in their 30s to invest everything in GICs. You definitely want to preserve capital, but you also want to beat inflation over the long term. You'll be withdrawing some of that money in your 80s and 90s if you live that long, and inflation can really eat away at your nest egg over that period.


Isn't that the purpose of asset allocation, though? I'm not suggesting the OP has a portfolio of 100% fixed income. The equity portion produces the returns and the fixed portion is responsible for capital preservation. The market linked GIC is designed to cast the illusion of market returns with no risk. I haven't been a part of the investing world for a long time - not nearly as long as most of you - but I have yet to see a hybrid product designed by an _institution_ to benefit primarily the _customer_.


----------



## brad (May 22, 2009)

Canadian said:


> Isn't that the purpose of asset allocation, though? I'm not suggesting the OP has a portfolio of 100% fixed income.


Right, you weren't suggesting that, but it looked like The Royal Mail was. That's what I was replying to when I brought up inflation.


----------



## Eclectic12 (Oct 20, 2010)

Canadian said:


> nobleea said:
> 
> 
> > These Market-linked GIC's usually get pushed/marketed hard after the market has had a few years of above average returns (as is the case now).
> ...


I guess it depends on the financial institution ... I'd have to check my records but I believe it was around the late '90s or early 2000's when I first heard of them from a combination of credit unions and the bank.

I tend to do my own thing so I don't deal with reps enough to tell what is or is not being pushed after I pushed to get one.

Of course this was before most offering this product started copying the "#% limit" that my house mate was stuck with.




Canadian said:


> ... The time to invest in one of these (if any) would have been in 2008/2009.


Agreed ... my mom would be happy with the she & my brother-in-law bought at that time.
Of course part of the attraction to the two was that it was easy for him to explain to her plus it required no effort until payout.


Cheers


----------



## fatcat (Nov 11, 2009)

as i said earlier, to me, the real problem is confusion over investing goals, not so much the complexity and shell game of the products themselves

gic's have a certain place which is a small return in exchange for a guaranteed return of capital
like a good dairy cow, they should be given their own field and left alone to do their work

if you want to beat inflation you need to allocate a portion to equities 

a market linked gic is a 2-headed cow that does a poor job of investing in stocks and a poor job of providing a guaranteed investment


----------



## Eclectic12 (Oct 20, 2010)

Why a poor job as guaranteed investment?

The guarantee is a return of capital, where I have yet to hear anyone complain they didn't get their capital back.
The cost paid for the guarantee may be a different story.


Cheers


----------



## Canadian (Sep 19, 2013)

Eclectic12 said:


> The guarantee is a return of capital, where I have yet to hear anyone complain they didn't get their capital back.


But does the investor _really_ get all their capital back? If one invests $10,000 in a market linked GIC today and recovers $10,000 in 2019, the investor has lost purchasing power unless we enter a deflationary environment.


----------



## fatcat (Nov 11, 2009)

Eclectic12 said:


> Why a poor job as guaranteed investment?
> 
> The guarantee is a return of capital, where I have yet to hear anyone complain they didn't get their capital back.
> The cost paid for the guarantee may be a different story.
> ...


well, it doesn't return the 2-3% it could return, guaranteed, it only returns 0% and there is the loss due to inflation as canadian points out

since it is returning 0% on the market link gic, that means that equities are doing badly otherwise you would have a gain, so that means whatever equities you hold are not doing well

you lose in equities
you lose by getting no gic return
and lose to inflation

at least with a regular gic you are offsetting that with a guaranteed gain

it seems to me to be a ******* product

though i can see it for someone who is ultra cautious and has an all gic portfolio and maybe wants to just dip the tip of their toe into equities, then i can see it
but the op said he had plenty in equities


----------



## Eclectic12 (Oct 20, 2010)

Canadian said:


> But does the investor _really_ get all their capital back?


Most people I know would say that if they bought a stock for $10K, had it drop for a couple of years to $5K and then had it rebound so that they could get the original $10K from the sale would say they did get their capital back.

My understanding is capital is what one puts into the investment.




Canadian said:


> If one invests $10,000 in a market linked GIC today and recovers $10,000 in 2019, the investor has lost purchasing power unless we enter a deflationary environment.


That is one of the risks in choosing the product ... the flip side of the coin is that someone who chose the same investments and sells has lost the same purchasing power. The same as someone who locks into a GIC at 1.5% when inflation is running at a higher rate.


Cheers


----------



## Dibs (May 26, 2011)

Jets99 said:


> And still wondering, has anyone out there ever purchased a market linked GIC and if so which one, and how did it work out for you?


I had two of these market-linked GICs. I bought them in 2008 when the markets were down and they ended up paying back the maximum return. That said, I would probably not buy them again. 

The first reason is that they are doing something that you can do yourself. You essentially lend them money for five years at a low (or 0%) interest rate, they invest in the market, and while they bear the risk of losing money, they keep any excess returns. In my case, 

Secondly, the excess returns that they want to keep has changed over time. Let's look at what kind of market linked GIC's TD has offered over the years:

2008: 5 year Financial GIC Plus - Minimum 0%, Maximum 70% return - the one i bought
2011: 5 year Financial GIC Plus - Minimum 0%, Maximum 40% return 
2013: 5 year Financial GIC Plus - Minimum 0%, Maximum 24% return
2014: 5 year Financial GIC Plus - Minimum 0%, Maximum 25% return

You can read more about these Market-linked GICs in previous threads:
http://canadianmoneyforum.com/archive/index.php/t-14933.html
http://canadianmoneyforum.com/archive/index.php/t-8428.html
http://canadianmoneyforum.com/archive/index.php/t-11923.html


----------



## Eclectic12 (Oct 20, 2010)

fatcat said:


> well, it doesn't return the 2-3% it could return, guaranteed, it only returns 0% ...


Refresh my memory ... who was offering 2-3% GICs in late 2008/early 2009, when my mom bought the product.




fatcat said:


> ... and there is the loss due to inflation as canadian points out


Is that any different than someone who locked in to a GIC at a lower rate than inflation is running at?




fatcat said:


> ... since it is returning 0% on the market link gic, that means that equities are doing badly otherwise you would have a gain, so that means whatever equities you hold are not doing well
> 
> you lose in equities
> you lose by getting no gic return
> ...


... and where the GIC return doesn't keep pace with inflation - is the improvement going to make a difference?




fatcat said:


> ... though i can see it for someone who is ultra cautious and has an all gic portfolio and maybe wants to just dip the tip of their toe into equities, then i can see it ...


 ... which is different than the tone of the posts that made it out like there was no use for them.

I bought equities in 2009 and did better than my mom with them. This product (plus it being a portion of the overall picture) satisfied her concern about getting the original amount back while providing a much better return than any of the comparable GICs at the time.


Cheers


----------



## Retired Peasant (Apr 22, 2013)

fatcat said:


> ...though i can see it for someone who is ultra cautious and has an all gic portfolio and maybe wants to just dip the tip of their toe into equities, then i can see it
> but the op said he had plenty in equities


Even if that is what you want, you're still better off doing it yourself. These market-linked GICs usually cap what you can make. My uncle has been talked into them over the last couple of years. The market has done well, however his return was capped. He'd have been better off buying a GIC at the going rate that yielded the capital he wanted guaranteed. Then take the remainder and put it into a broad market ETF. The entire return on that would have been his to keep. He still would have had his capital guaranteed, if the ETF returned nothing.


----------



## fatcat (Nov 11, 2009)

Eclectic12 said:


> Refresh my memory ... who was offering 2-3% GICs in late 2008/early 2009, when my mom bought the product.


i was buying 4% gic's in 2009




> Is that any different than someone who locked in to a GIC at a lower rate than inflation is running at?


inflation will be what it is ... you are still making more on a standard gic than a market linked




> ... and where the GIC return doesn't keep pace with inflation - is the improvement going to make a difference?


of course, you are making 2-3% versus 0% .... are you serious ?




> ... which is different than the tone of the posts that made it out like there was no use for them.


 am trying to find a reason to like them ... they might be appropriate for ultra-conservative (think savers) who want to dip their toe in the water and juice returns a little ... they are not appropriate for anyone including the op who has an allocation to equities in place


----------



## Eclectic12 (Oct 20, 2010)

Retired Peasant said:


> Even if that is what you want, you're still better off doing it yourself.
> These market-linked GICs usually cap what you can make...


Assuming one has the skills, the accounts and is willing to .... sure.

There are a lot of people who don't fit this profile though.




fatcat said:


> i was buying 4% gic's in 2009


From whom?
I don't recall seeing anything in close to this in any of the surveys I saw ... not that I am doubting you, just that I don't know of any that where.




fatcat said:


> ... inflation will be what it is ... you are still making more on a standard gic than a market linked ...


In the situation that equities drop, sure .... for what my mom bought in 2009 on the other hand, I highly doubt many GICs paid simple interest of 70%.

Before you say it, yes buying the equities directly could have resulted in a bigger return (and over a shorter period) but the limiting factor was what she was willing to agree to, where more than a yearly update was out of the question.





fatcat said:


> of course, you are making 2-3% versus 0% .... are you serious ?


As I say ... none of the surveys saw had anything close to 3% ... but yes, if one was able to get that much then the GIC is a clear winner. 






fatcat said:


> ... am trying to find a reason to like them ... they might be appropriate for ultra-conservative (think savers) who want to dip their toe in the water and juice returns a little ...


For me it's more about understand the full range of tools in the toolbox and applying it as it fits to the investor versus a one size fits all.




fatcat said:


> ... they are not appropriate for anyone including the op who has an allocation to equities in place


Agreed.


Cheers


----------



## andrewf (Mar 1, 2010)

I think 4% GICs were still quite common in late 2008 and early 2009. The yield curve was gradually deflating over 2009 - 2012. It didn't hit the current lows overnight.


----------



## Retired Peasant (Apr 22, 2013)

Eclectic12 said:


> Assuming one has the skills, the accounts and is willing to .... sure.
> 
> There are a lot of people who don't fit this profile though.


Including the OP?


----------



## Jets99 (Aug 26, 2011)

Dibs said:


> I had two of these market-linked GICs. I bought them in 2008 when the markets were down and they ended up paying back the maximum return. That said, I would probably not buy them again.
> 
> The first reason is that they are doing something that you can do yourself. You essentially lend them money for five years at a low (or 0%) interest rate, they invest in the market, and while they bear the risk of losing money, they keep any excess returns. In my case,
> 
> ...


DIbs, Thanks for this. This is good info. The key point in all of this discussion is how the returns are calculated. It's not the same for all of these products and has changed over the years. My plan was to go and read the fine print to try and understand the math behind them. 

The general consensus is that this is a bad product but lots of generalizations. If I find one I think is worth buying I'll post


----------



## AltaRed (Jun 8, 2009)

I see the OP as getting uncomfortable with the prospect of a substantial (paper) capital loss beyond a certain level should we have another 2008-2009, and perhaps at the level of equities the OP already has (either absolute or percentage wise... or both). And yet is balking at yet more fixed income at a paltry 2.6% or so. 

It is usually at this fork of the road that investors look to another 'asset class' (loosely defined). The OP has not responded with interest in bond ETFs, probably because of the capital volatility and/or a reluctance to reach for investment grade corporate bonds. What else to do if one does not want to be as speculative as pure equity? 

Market linked GICs do provide a niche that will potentially (likely?) satisfy that itch for more than 2.6%... albeit the variable opportunity rate is actually 0 to 3.8% (3.8% compounded for 5 years equals about 20%). Is the potential for an end point of 3.8%/yr compounded worth the risk of 0%? I would suggest NO, but if the investor would otherwise limit him/herself to NO equity, that is also likely a mistake for at least a portion of one's asset allocation.

Looking at another example, one might argue a REIT ETF such as ZRE might scratch that itch. Recognizing it is still an equity and capital is obviously at risk, the yield might be beatable, or at least more likely to be sustained over the long haul. As an example, ZRE yield for May was 5.78% (5.23% after MER). Its distribution history has been pretty flat since its 2010 beginnings, although the downside is there is really no recession history. One might check XRE to see what happened its distributions during the financial crisis (I don't like XRE due to is market cap weightings). That said, over the long haul, distribution payout has more potential to grow than to decrease. If the OP does not have to touch the capital, why then would the OP care about the capital itself?

Bottom line is that outside the base equities market (commons and preferreds), these days and perhaps for the medium term it is hard to do 5% per year without some capital risk.


----------



## fatcat (Nov 11, 2009)

Eclectic12 said:


> From whom?
> I don't recall seeing anything in close to this in any of the surveys I saw ... not that I am doubting you, just that I don't know of any that where.


i have a couple of 5 year gic's coming due next year, both are at 4%, one from maxa and the other from ally (now rbc)
i could have done even better if i bought in 2008-2009



> For me it's more about understand the full range of tools in the toolbox and applying it as it fits to the investor versus a one size fits all.


fair enough, it is a tool for some folks, i just don't see the use for anyone who, like the op, already has his equity allocation filled out, he should balance that with pure fixed income, not a hybrid


----------



## Eclectic12 (Oct 20, 2010)

Retired Peasant said:


> Including the OP?


I was thinking more of your uncle & my mom ... I'll have to re-read the thread to see what sort of skills they appear to have.


IAC ... my point is that skill levels as well as what one is willing to do is often overlooked.

To us my mom as an example:
Selected equities were up 100% plus any payments (that was me) > the GIC that paid her 70% (what Mom did) > whatever a five year GIC paid (that was Mom's original plan).


Cheers


*PS*

Or another way to look at it is the lessor of two evils. :biggrin:


----------



## Woz (Sep 5, 2013)

Essentially, a market linked GIC is just redirecting some of the funds from your GICs to purchase illiquid call options. There doesn’t seem to be much of a markup so it’s probably not the worst deal. It is a bit funny though that many of the people who purchase market linked GICs probably would never consider options and view them as far too risky.


----------



## SkyFall (Jun 19, 2012)

Woz said:


> Essentially, a market linked GIC is just redirecting some of the funds from your GICs to purchase illiquid call options. There doesn’t seem to be much of a markup so it’s probably not the worst deal. It is a bit funny though that many of the people who purchase market linked GICs probably would never consider options and view them as far too risky.


dammn thats interesting didnt know that!


----------



## Eclectic12 (Oct 20, 2010)

Woz said:


> Essentially, a market linked GIC is just redirecting some of the funds from your GICs to purchase illiquid call options. There doesn’t seem to be much of a markup so it’s probably not the worst deal.


I think the markup comes more from the caps. For example, the one I bought in the late 90's had almost no cap whereas my house mate was disappointed to discover the one he bought without any questions/investigation had a 10% cap. So he took the same risk as it was the same index where the purchases were a couple of weeks apart but was paid less than half of what I was. The bank on the other hand, like pocketed a fair profit, over and above what my bank pocketed.




Woz said:


> It is a bit funny though that many of the people who purchase market linked GICs probably would never consider options and view them as far too risky.


Skills and knowledge play into this ... where there is more, the odds that whomever is going to buy a market linked GIC are pretty low.

In my case, I've now setup accounts so I could buy options or a combo of GIC/ETF but in the late 90's, the accounts plus knowledge were not in place. Then too, the costs as well as the choices to "roll your own" have dropped dramatically.


Cheers


----------



## Jets99 (Aug 26, 2011)

OMG I found it! Undeniable proof. This one's for you fatcat. 

http://youtu.be/uWGxdXkCcj4


----------



## fatcat (Nov 11, 2009)

Jets99 said:


> OMG I found it! Undeniable proof. This one's for you fatcat.
> 
> http://youtu.be/uWGxdXkCcj4


"this thing comes at you, you may only have one shot" ... it's out there i guess ... though maybe it should be called the semi-history channel

find bigfoot and you can just call up your broker and say "gimme a 100 shares each of everything listed on the tsx" ... 

oh yeah ...


----------

