Market Index GIC (formerly Index-Linked Term Deposit)

This is a very competitive investment opportunity. It guarantees your principal and has the potential for a great return. This investment is an ideal choice if you have the time to let your investment grow. If you don't need access to your funds for a 3 or 5-year period and you are willing to take minimum risk for a potentially higher return then read on.

 

What is Market Index GIC?

An Market Index GIC is a term deposit that pays a rate of return based on the performance of the S&P/TSX 60 stock market index while providing 100% principal guarantee. This product is your choice of a 3 or 5-year investment with the interest payable on the maturity date. Interest earned is based on the average of the monthly closes of the S&P TSX 60 Index for the selected investment period. Since the principal is 100% guaranteed, Members can take advantage of gains in the stock market with no downside risk.

 

Who Should Consider a Market Index GIC?

• Members who are looking for a deposit with a principal guarantee that offers the potential for a higher return than the return paid on fixed rate deposits.
  
• Members who are looking for an investment that carries no fees or commissions.
  
• Members searching for a diversified investment in Canadian corporations.
  
• Conservative individuals who are not willing to risk their initial investment.
  
• Members who are comfortable with investing their funds for a 3 or 5-year period.
  

Who Should Not Buy a Market Index GIC?

• Members who are dependent upon the current income from their investments.
  
• Members who may need their principal before the term of the deposit has expired.
  
• The Market Index GIC is not eligible as a RRIF, as the deposit is not redeemable prior to maturity and does not have a guaranteed rate of return. An RRSP Market Index GIC is available for Members under 67 years of age only.
  
  

Market Index GIC Features:

· Term:                             Your choice of 3 or 5 years
· Principal:                       Guaranteed
· Participation Rate:        100% for both 3 and 5-year terms - used to calculate the average monthly closing value.
· Redemption:                  Only at maturity
· Minimum Investment:   $500 - RRSP
                                        $1,000 - Non-registered
· Calculation:                   Average of the S&P/TSX 60 monthly closing values
· Interest:                       Paid at maturity
· Fees:                             Investment is not subject to any fees
· Insurance:                    Principal investment is fully insured by the Deposit Insurance Corporation of Ontario (DICO) to                                         a maximum of $100,000.


Member Benefits:

100% Principal Guarantee. Regardless of the performance of the S&P/TSX 60 Stock Index, the principal investment is fully guaranteed. Members will not lose any of their original investment, even in a significantly declining market.

Higher Potential Return Versus Traditional GICs. Compared with term deposit rates over the past 12 months, the historical returns of the S&P/TSX 60 Index demonstrate an earning potential that is notably greater.

Diversified Investment. The S&P/TSX 60 Index is a well-diversified portfolio made up of 60 large publicly traded Canadian companies.

Method of Calculation. Interest earned will be based on the average return of the Index for the 3 or 5 years of the investment period. The average is calculated by adding the Month-End Closing Values of the Index for 3 year (36 months) or 5 years (60 months) and dividing the sum by the Total Number of Months. This average is then compared to the Opening Value of the Index to determine the percentage change. The averaging protects the investment from severe short-term market fluctuations.

Risks

Unlike other term deposits, there is no guaranteed return on this product. Depending on the performance of the stocks comprising the S&P/TSX 60 Index over the term, it is possible that, at maturity, the investor will receive only their principal back.

 

Historical Performance of the S&P/TSX 60 Index (5-Year Maket Index GIC)

	2002	2003	2004	2005	2006	2007
Annual Rate of Return	-14.0%	25.5%	13.8%	26.29%	19.6%	11.14%
Average Five-Year Return	2.96%	7.78%	3.70%	7.36%	14.24%	19.27%

Average five-year return is based on a simple interest calculation representing the average of the five-year annual returns. Historical returns are not indicative of future performance.

How is the return calculated?

The return is calculated by adding the Month-End Closing Values of the Index and dividing the sum by the Total Number of Months. It is then compared to the Opening Value of the Index to determine the percentage change (i.e. the return earned).

Example:
If, on the start date, the Index is valued at 300, the Average Month-End Closing Value over the 5 years of the term is calculated to be 420, and the Participation Rate is 100%, then the return over the life of the investment would be:

420 - 300 x 1.00 = 0.40 or 40%
    300

The simple annual rate of return over 5 years would then be:

40% = 8%
  5

 

 

Market Index GIC 2008/2009 Sales Periods

 

3-Year Market Index GIC
Sales Period Begins	Sales Period Ends	Index Set Date
September 1, 2008	November 30, 2008	December 22, 2008

 

5-Year Market Index GIC
Sales Period Begins	Sales Period Ends	Index Set Date
October 6, 2008	November 7, 2008	November 13, 2008
November 10, 2008	December 5, 2008	December 11, 2008
December 8, 2008	January 16, 2009	January 22, 2009
January 19, 2009	February 27, 2009	March 5, 2009

 

Click Here to see the Performance of your S&P/TSX 60 Market Index GIC