GIC laddering is a strategy of purchasing GICs with different maturity dates and interest rates to help maximize returns, increase liquidity and reduce reinvestment risk.
Instead of investing $25,000 in a single GIC, break it up so that $5,000 each is invested in five GICs with different terms of 1 through 5 years. When the first term matures after 1 year, renew it into a five year GIC. When the second term matures, renew it for five years and so on.
Amount invested (maximum value $5,000,000)
25,000
|
Term | 1 Year | 2 Year | 3 Year | 4 Year | 5 Year |
Interest rate
|
1.00%
|
1.25%
|
1.50%
|
1.75%
|
2.00%
|
|
Laddered GICs
Initial Investment |
Today |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
$5,000 | Purchase 1 Yr GIC @ 1.00% and invest $5,000 |
Purchase 5 Yr GIC @ 2.00% and invest $5,050 |
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$5,000 | Purchase 2 Yr GIC @ 1.25% and invest $5,000 |
- | Purchase 5 Yr GIC @ 2.00% and invest $5,126 |
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$5,000 | Purchase 3 Yr GIC @ 1.50% and invest $5,000 |
- | - | Purchase 5 Yr GIC @ 2.00% and invest $5,228 |
||
$5,000 | Purchase 4 Yr GIC @ 1.75% and invest $5,000 |
- | - | - | Purchase 5 Yr GIC @ 2.00% and invest $5,359 |
|
$5,000 | Purchase 5 Yr GIC @ 2.00% and invest $5,000 |
- | - | - | - | Purchase 5 Yr GIC @ 2.00% and invest $5,520 |
$25,000 |
Total Interest
Year |
Laddered GICs |
1 Year GICs |
Laddered Advantage |
After 5 Years | $2,332 | $1,275 | $1,057 |
After 10 Years | $5,177 | $2,616 | $2,562 |
Results
Using laddered GICs would provide you $1,057 more after 5 years and $2,562 more after 10 years than using 1 year GICs
Using laddered GICs would provide you $1,057 more after 5 years and $2,562 more after 10 years than using 1 year GICs
Investment Value
Year | Laddered GICs | 1 Year GICs | Laddered Advantage |
1 | $25,375 | $25,250 | $125 |
2 | $25,806 | $25,503 | $304 |
3 | $26,284 | $25,758 | $526 |
4 | $26,796 | $26,015 | $781 |
5 | $27,332 | $26,275 | $1,057 |
6 | $27,879 | $26,538 | $1,341 |
7 | $28,437 | $26,803 | $1,633 |
8 | $29,005 | $27,071 | $1,934 |
9 | $29,585 | $27,342 | $2,243 |
10 | $30,177 | $27,616 | $2,562 |
Assumptions
Total interest is before tax. Interest is compounded annually. Interest is paid at maturity.
Total interest is before tax. Interest is compounded annually. Interest is paid at maturity.
Disclaimer
This calculator is for educational purposes only. All charts and illustrations are for illustrative purposes only and are not intended to illustrate the performance of any security or portfolio. You should not rely on the results as an indication of your financial needs and we recommend that you seek your own financial, investment, tax, legal or accounting advice nor shall the information herein be considered as investment advice or as a recommendation to enter into any transaction. Professional advice should be obtained prior to acting on the basis of this information. The deduction of advisory fees, brokerage or other commissions and any other expenses that would have been paid may not be reflected in the calculation results.©Copyright 2024 Ativa Interactive Corp. All rights reserved. Powered by Ativa.com.