# Deleted



## Ag Driver (Dec 13, 2012)

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## lonewolf :) (Sep 13, 2016)

For over 30 years rates were in a down trend rolling over 5 year GICs made the most money compared to rolling over shorter term. If rates rise for 30 years rolling over 5 year GICs might not produce the most money.


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## birdman (Feb 12, 2013)

Okay, I will bite and may be on my own on this one. While my fixed income is pretty well all in GIC's and High Interest Savings I am not a fan of using ladders. My reasoning is pretty simple in that rates go up and rates go down and I invest in the point in the yield curve which I feel has the most value and where I thin k rates are going. Years ago when rates started to fall I was investing only in the 5 year category and continued to do so until about 5 yrs ago when I felt rates were at, or close to their low. This turned out to be a good strategy. Presently, and in order to get some sort of yield I am in the 18 mos - 2yr category at rates of around 2%. During this time rates were at their bottom and longer term rates did not seem to add much value so why invest in them? More recently as GIC's mature I have been investing into high interest savings accounts (Achieva, BNS Momentum Plus Svgs which I ladder out to one yr, and my fixed income GIC RIF's at 2%, most of which mature this year. To answer your question, my fixed income yield including savings is about 2% and represents 65% of my investment portfolio. I don't think there is much doubt that we are in a gradually increasing rate environment so will have to see how things unfold over the next while.


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## like_to_retire (Oct 9, 2016)

frase said:


> Presently, and in order to get some sort of yield I am in the 18 mos - 2yr category at rates of around 2%..


It's fairly hard to predict interest rates, so a ladder offers your best defense. With a 5 year ladder and two GIC's per rung, you pick up the latest rates of the day every six months rather than making a bet that you have taken on at 1 1/2 to 2 years. If rates rise rapidly, that 2 years is a long time to wait. With the ladder, you are able to renew at the best 5 year rate, and then only waiting 6 months to do it again. A full 20% of your investment comes due every year. Ladders are hard to beat.

ltr


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## AltaRed (Jun 8, 2009)

like_to_retire said:


> It's fairly hard to predict interest rates, so a ladder offers your best defense. With a 5 year ladder and two GIC's per rung, you pick up the latest rates of the day every six months rather than making a bet that you have taken on at 1 1/2 to 2 years. If rates rise rapidly, that 2 years is a long time to wait. With the ladder, you are able to renew at the best 5 year rate, and then only waiting 6 months to do it again. A full 20% of your investment comes due every year. Ladders are hard to beat.
> 
> ltr


+1 

With GIC ladders, it is almost impossible to beat a good 5 year GIC ladder (10 holdings) on a 'going concern' basis in which all GICs have rates based on 5 year terms. The math is the math is the math even with rising interest rates. I have been operating a 5 year ladder for well over 10-15 years. In the last few years, I have been intermingling BBB (or higher) debentures/term notes, and BBB (or higher) corporate bonds in the mix of GICs to juice the returns just a bit, and for the fun of doing something beyond just GICs. It almost stretches to a 6 year ladder. That said, simplicity is now my goal and I will likely revert to a straight 5 year GIC ladder of 10 holdings going forward.

Current yield of that ladder is 2.97% arithmetic average. Each of my holdings is about the same size but not exact ( +/-10% variation). It is too much work for me to calculate weighted average for this post but it would be almost exactly 3% as well.


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## Gordo99 (Dec 13, 2011)

AltaRed said:


> +1
> 
> With GIC ladders, it is almost impossible to beat a good 5 year GIC ladder (10 holdings) on a 'going concern' basis in which all GICs have rates based on 5 year terms. The math is the math is the math even with rising interest rates. I have been operating a 5 year ladder for well over 10-15 years. In the last few years, I have been intermingling BBB (or higher) debentures/term notes, and BBB (or higher) corporate bonds in the mix of GICs to juice the returns just a bit, and for the fun of doing something beyond just GICs. It almost stretches to a 6 year ladder. That said, simplicity is now my goal and I will likely revert to a straight 5 year GIC ladder of 10 holdings going forward.
> 
> Current yield of that ladder is 3.003% arithmetic average. Each of my holdings is about the same size but not exact ( +/-10% variation). It is too much work for me to calculate weighted average for this post but it would be almost exactly 3% as well.


Always looking for better fixed income and have considered GIC ladder but still sitting with most of it in Steinbach Credit Union Regular Savings account currently at 2.05%. I like the liquidity and it's not far off the 2.174% of the OP's GIC ladder net yield but if I can get closer to 3% then the ladder is worth the extra effort. Going to do the math with a Steinbach GIC ladder.


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## fatcat (Nov 11, 2009)

i prefer a 3 year ladder as the opportunity cost is too great ... the difference between 3-year gic and 5-year gic isn't worth the locked money


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## OnlyMyOpinion (Sep 1, 2013)

AltaRed said:


> ... Current yield of that ladder is 2.97% arithmetic average. Each of my holdings is about the same size but not exact ( +/-10% variation). It is too much work for me to calculate weighted average for this post but it would be almost exactly 3% as well.


Yes bond and strip bond ladders do complicate the math. I don't fuss it either. If I have cash that is earmarked for FI, I search out a suitable strip bond and purchase it. Suitable being best yield within bbb or greater, and the maturity year we need to keep the rungs in place. 
Speaking here only of our non-reg where 15 strips purchased at times over the last 4 yrs mature over the next 7 years to pay the retirement bills for the next 8 yrs. Unweighted avg yield is 3.12%.

Reporting accrued interest was made 'simpler' a few years ago when TDDI had to start issung T slips. 

On the other hand, taking a look to respond accurately to this thread revealed that two smaller strips got redeemed on Dec. 29 ahead of their maturity date, so now I'll have to see if the ladder needs some patching (proably not, it was only 34k). But it does emphasize the reliability and simplicity of a 5yr GIC ladder.


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## gibor365 (Apr 1, 2011)

> While my fixed income is pretty well all in GIC's and High Interest Savings I am not a fan of using ladders. My reasoning is pretty simple in that rates go up and rates go down and I invest in the point in the yield curve which I feel has the most value and where I thin k rates are going.


I agree. In many cases I buy GIC for period up to 3 years and trying to catch promos, like this Aug Oaken offered 3.05% for 3 years. So, my GICs rates are ranging from 2.2%(those gonna mature in months or two) to 3.05% with average rate about 2.8%. With constant promos from online banks, I just don't see too much sense to lock all cash when you can get from time to time goog rates on HISA, like now 3% in Simplii , 2.5% in Tangerine, 2.3% in EQ


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## jargey3000 (Jan 25, 2011)

fatcat said:


> i prefer a 3 year ladder as the opportunity cost is too great ... the difference between 3-year gic and 5-year gic isn't worth the locked money


I brought this idea up a while ago here.....and I was talked out of it ...


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## like_to_retire (Oct 9, 2016)

jargey3000 said:


> I brought this idea up a while ago here.....and I was talked out of it ...


Smart, because the 5 year ladder is the better choice. You simply can't predict that after three years the rates won't be lower and you wished you had chosen a 5 year term. Regardless whether it's a 3 year or a 5 year ladder, the GIC's still mature every 6 months to get the best rate of the day.

ltr


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## birdman (Feb 12, 2013)

like_to_retire said:


> It's fairly hard to predict interest rates, so a ladder offers your best defense.


I agree that it is hard to predict interest rates and in a generally stable rate environment a ladder is a good place to be. However, when you are in an increasing or decreasing environment one may wish to reconsider this strategy. Also of importance is the shape of the yield curve. The point I am suggesting is that in a falling rate environment you may wish to be invested in a longer duration and in an increasing rate environment you may wish to have a shorter duration. Personally I am pretty comfortable in that we are in an increasing rate environment the degree of which is yet unclear, albeit most likely it will be I don't mind running the risk for I guess about a .50% or so shortfall in interest which is fully taxed.


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## crgf1k (Aug 8, 2015)

My understanding is that the important part about a ladder is that after 4 years every GIC you buy is benefiting from the 5 year interest rate premium. This is the first I've heard of having 10 holdings spaced 6 months apart though...sounds like a good idea, especially if you'd consider breaking the ladder to take advantage of major stock market corrections.


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## Ag Driver (Dec 13, 2012)

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## james4beach (Nov 15, 2012)

I also think you should always buy 5 year GICs. You only have to fill the ladder once and after that point, you only ever have to buy 5 year GICs. Generally, these will always yield more than the others and that's the point of this strategy. I strongly recommend not trying to predict whether interest rates are about to go up or down.

The average maturity on the 5 year GIC ladder is only 3 years... you're really not locked in for very long. It's like holding XSB, actually. For some reason people get uncomfortable with the 5Y contracts but the _average_ maturity is the key factor.

My current GIC ladder contains purely 5 year contracts: 2.65, 3.00, 3.10, 2.80, 2.40, 2.56, 2.80, 2.17, 2.15, 2.25, 2.00 (in purchase order so you can see the yields reducing over time). Most of these are big 5 banks and a few are Outlook Financial (Assiniboine Credit Union).



Ag Driver said:


> What is everyone yielding on average for their GIC ladders?


My average is 2.53%


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## gardner (Feb 13, 2014)

I have a 10-way 5 year ladder at Oaken/HT that is yielding about 2.94%. Combined with a sizeable tranche still at EQ bank, I am getting 2.65% on CA$.

I also have a 10-way 5 year ladder in $US at Tangerine that yields 2%. Tangerine is still the best game in town for US$ GICs. Since there is no CDIC on US$ I am not entirely certain if the Tangerine ladder is the best way to hold $US FI, but BNS is pretty big and stable so I am not overly worried.

My general feeling is that for C$, a 5 year GIC ladder is going to be the best completely secure FI rate. Generally I think the 5 year rate premium is priced to compensate for the risk of holding a longer GIC while rates rise. Rates would have to rise extraordinary fast to oversweep the rate premium for 5Y over 3 or 2 year rates.

Personally, I have 10-way ladders on a ~6-month schedule (versus 12 month) more as a function of happenstance. I think having ~20% or so per year coming up for renewal is they key pattern you want to keep going. I wound up on 10-way schedules because of periods where I needed to add to the ladder, and timing in between the existing renewal schedule made sense. Having 2.3% HISA at EQ, as long as that lasts, makes holding cash for a few months between rungs fairly risk free.

Aside from all this, I have some money in (convertible) debentures, but I generally don't mess with debentures that I would not convert to the stock, and I kind-of consider those as equity-in-waiting versus FI. The debentures I'm hanging onto are yielding 5%+.


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## gibor365 (Apr 1, 2011)

> I also think you should always buy 5 year GICs.





> My average is 2.53%


I don't think so .... we have different opinions for last 5 years and my average rate on selected HISAs and up to 3 years GICs are always higher


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## AltaRed (Jun 8, 2009)

Ag Driver said:


> This is the first I have heard of this as well. I am also of the "keep it simple stupid" band wagon. Chasing promo rates every 3 months is not something I am interested in doing...every 6 months renewing a GIC however isn't that taxing vs constantly on the prowl for the best rate. I might consider every 6 months in the future.


The more holdings you have in a 5 year ladder, the more often a GIC matures to take advantage of the the prevailing interest rate for a 5 year GIC. It may not make one iota of difference in the long run but it feels psychologically better to renew something every 3 or 6 months. Note: A 5 year GIC ladder can hold any multiple of 5 in 5 year GICs..... 5 spaced a year apart, 10 spaced 6 months apart, 15 spaced 4 months apart or 20 spaced 3 months apart. Obviously the more holdings one has, the more work it is to renew maturing GICs. I'd suggest 10 or 15 holdings (depending on dollar size of GIC ladder) is a good compromise.

FWIW, we will never convince folk who love to chase promo HISA or one off GIC rates and have accounts at 5-10 different online financial institutions. The camps are as far apart as the Dems and Republicans. So be it. Some people are just naturally stubborn. :smile:


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## gibor365 (Apr 1, 2011)

> FWIW, we will never convince folk who love to chase promo HISA or one off GIC rates and have accounts at 5-10 different online financial institutions. The camps are as far apart as the Dems and Republicans. So be it. Some people are just naturally stubborn.


SO what is bad at chasing HISA/GICs promos?!  . Esp now when I'm retired?! It's just kinda of hobby that give us extra $$$. Actually I have accounts only in 5 institutions: Tangerine, Simplii, EQ, Oaken and PT. In couple of months will take out all $$$ from PT (after GIC matures) as their rates inferior for several years. I just see that for last 10+ I got higher return than I would with 5 years ladder. And considering that I'm working with about 1M cash (including my mom amd MIL money), even 0.5% is rather significant


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## lonewolf :) (Sep 13, 2016)

probably best to roll GICs over beginning of May. If change where holding a few times can lose a bit of time slippage & still be near seasonal highs.


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## Ag Driver (Dec 13, 2012)

Deleted


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## AltaRed (Jun 8, 2009)

gibor365 said:


> SO what is bad at chasing HISA/GICs promos?!  . Esp now when I'm retired?! It's just kinda of hobby that give us extra $$$. Actually I have accounts only in 5 institutions: Tangerine, Simplii, EQ, Oaken and PT. In couple of months will take out all $$$ from PT (after GIC matures) as their rates inferior for several years. I just see that for last 10+ I got higher return than I would with 5 years ladder. And considering that I'm working with about 1M cash (including my mom amd MIL money), even 0.5% is rather significant


It is a matter of choice obviously depending on how much of one's asset allocation is in that type of investment. My time is better spent elsewhere. Since I have less than 10% of my portfolio in things like HISAs and GICs, there is absolutely no benefit in me chasing ANY kind of rate improvement. I have one HISA and all my fixed income (GICs, Bonds, etc) is in one RRSP brokerage account. YMMV


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## fatcat (Nov 11, 2009)

like_to_retire said:


> Smart, because the 5 year ladder is the better choice. You simply can't predict that after three years the rates won't be lower and you wished you had chosen a 5 year term. Regardless whether it's a 3 year or a 5 year ladder, the GIC's still mature every 6 months to get the best rate of the day.
> 
> ltr


i disagree 

like every single move we make when we invest, we make a smaller or larger prediction of the future when we choose a 3 or 5 year ladder

the yields between 3 and 5 year gic's is so small that i see little sense in locking money at 5 when we are at historic lows and there is nowhere to go but up

returning money at 3 gives me a) investable cash back 2 years earlier with the same yield and b) opportunity for catching rising yields 

is easy to begin to stretch the ladder out to the traditional 5 as we see a relatively "normal" yield curve

if i were an all-gic investor i would agree that a 5 year ladder is the way to go


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## james4beach (Nov 15, 2012)

fatcat said:


> the yields between 3 and 5 year gic's is so small that i see little sense in locking money at 5 when we are at historic lows and there is nowhere to go but up
> 
> returning money at 3 gives me a) investable cash back 2 years earlier with the same yield and b) opportunity for catching rising yields
> 
> is easy to begin to stretch the ladder out to the traditional 5 as we see a relatively "normal" yield curve


That sounds to me like you're trying to time the bond market


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## AltaRed (Jun 8, 2009)

james4beach said:


> That sounds to me like you're trying to time the bond market


He is. The track record for speculating on rising interest rates is at least 5 years old and counting. But this year will be the year!


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## james4beach (Nov 15, 2012)

AltaRed said:


> He is. The track record for speculating on rising interest rates is at least 5 years old and counting. But this year will be the year!


Goes back to 2010 by my count, that's 8 years so far of everyone thinking they are seeing the "obvious" strategy for beating the bond market (and being wrong).

In addition, it's a multi dimensional market timing. This is more complex than the stock market. People like fatcat are simultaneously forecasting: rates at _multiple_ spots on the yield curve, plus the shape of the yield curve.

If someone really can predict all of that, then timing the stock market should be a breeze in comparison.


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## AltaRed (Jun 8, 2009)

Bond yields are now increasing since mid-2017 so maybe this is now sustained. But recent increases have trended before (5 year bond exceeded 2% in late 2013, and then took a nose dive yet again through 2015 and 2016 to about 0.6% if I recall correctly. Will the 5 year bond yield increase be sustained now - currently 2% or so. Maybe given global economic conditions....until the next equity correction and/or recession and/or equity bear market. It is a mug's game. I'd love to see it return to 2.5-3% in the next year or so, but I am not betting on it.

Added: The 'system' needs to return to 'normal' some time but that might be wishful thinking. I would like another 50 basis points just to capitalize on material cap gains from some of my 5 year fixed reset prefs.


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## james4beach (Nov 15, 2012)

Rising yields do not necessarily cause the 5 year GIC ladder, or a bond fund like XBB, to under perform. What matters more is the pace of increase and the shape of the yield curve, and the timing of each of these events.


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## fatcat (Nov 11, 2009)

james4beach said:


> That sounds to me like you're trying to time the bond market


of course i am but it costs me the 30 basis point spread between the 3-year and the 5-year at the moment and that more than compensates for the timing risk ...

not to mention that we are essentially on the floor of gic yields ...


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## gibor365 (Apr 1, 2011)

fatcat said:


> of course i am but it costs me the 30 basis point spread between the 3-year and the 5-year at the moment and that more than compensates for the timing risk ...


True


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## james4beach (Nov 15, 2012)

This video from G&M talks about the bond ladder approach. This is exactly how I run my own fixed income portfolio, combining GICs and individual bonds staggered at intervals. Very similar to a 5 year GIC ladder except, except you add bonds to lengthen it out to 10 years. I've been very happy with the approach.


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## agent99 (Sep 11, 2013)

james4beach said:


> This video from G&M talks about the bond ladder approach. This is exactly how I run my own fixed income portfolio, combining GICs and individual bonds staggered at intervals. Very similar to a 5 year GIC ladder except, except you add bonds to lengthen it out to 10 years. I've been very happy with the approach.


Nothing wrong with approach. Basically investing 101. But with interest rates increasing, I don't think I would be buying much beyond 5yrs at present.

One difference between GICs and Corporate bonds - bonds can usually be called at certain times. Need to read the prospectus for details. That bond you bought that was yielding 6 or 7% could get called if company can re-finance at a lower rate. You won't lose, but won't receive the interest for as long as you thought. Doesn't happen with GICs, so I would buy GIC over bond if yields are similar.


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