When you think Guaranteed Investment Certificates, you make think of muted-tone flower-patterned granny panties or something boring like that. Or you might not. Maybe it’s just  me.

GIC’s can actually be a very good tool in the fixed income portion of your portfolio.  Just like granny panties are a staple in your wardrobe (disclosure: I personally do not own any pairs).   Although GIC’s are predictable, sometimes predictable is good (as we learned from the market crash last year).

GIC’s can be non-registered, in your TFSA or in your RRSP.

I would recommend these be held in an RRSP or a TFSA because the interest income you get is 100% taxed at your marginal rate.  So if your tax rate is 35%, for every $100 you get, $35 gets taken back at tax time from the government.  Which sucks, IMO.

There are a few different types of GIC’s that you can get.

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So what should one hold in the RRSP?  I have heard some people say that an RRSP should be “safe” and should have more low risk investments held in them (e.g. think GIC’s), some people say more growth-geared investments because it grows tax deferred.

From what I have learned, I would say that looking at how investments are taxed would be a good starting point.

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