If you are an investor that is wary about the volatility of the stock market, then there are other types of investments that could be a good choice for you.
One type of investment is the guaranteed investment certificate, which is a financial instrument issued by a bank that pays you interest and is guaranteed not to lose value.
GICs are used by many investors that are seeking a way to make their money grow without exposure to too much risk of the market.
The interest rates paid by GICs vary so in order to get the best possible rate, it is necessary to have an understanding of how GICs work.
A guaranteed investment certificate is issued for a fix period of time, which can range from 6 months to 10 years.
Once the investment matures, the holder has the opportunity to either reinvest the funds again, or to take their principal amount and any interest earned.
One of the main factors that affect the amount of interest paid is the length of time that the funds are invested for.
Longer term GICs will pay more interest than shorter term ones.
Therefore, if you're investing for a long term goal, such as for your retirement, then buying a GIC with a term of 5 or 10 years might be a choice that you will want to consider.
The amount of money that is invested into the Guaranteed Investment Certificate will also play a large role in determining interest rates.
Just like banks are willing to offer higher interest rates to people that maintain larger balances in their savings account, you will get a better interest rate on a GIC if you invest more money.
However, if you're willing to accept lower rates, it is not mandatory to have a large amount of capital to invest in a GIC, as they can be purchased starting at $500.
Besides GICs, another type of investments you could consider are money market funds.
These are shorter term investments that can have interesting rates of return.
However, it should be noted that unlike GICs, the value of money market funds is not guaranteed and an investor may lose some of the amount they've invested.
However, this is actually very rare and has only happened a couple of times in the past few decades.
One downside with these funds, however, is that they generally require larger amounts of capital to be invested.
Anyone who wants to invest their money should educate themselves about the available investment choices, their risks and their possible returns.
Consulting a financial advisor is also a good course of action to take.