Technology Index-Linked GIC - Average Annual Return: 5.51% | Page 2 | Meridian Credit Union | Discussion forum

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Technology Index-Linked GIC - Average Annual Return: 5.51%
May 4, 2018
9:03 am
Top It Up
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NO argument here, Bill - but that's most likely due to the fact I'm no longer in the wealth accumulation phase of my life, instead, I'm now solidly into capital preservation and spending money like no get out - that sounds contradictory but both are being accomplished.

May 4, 2018
1:57 pm
Loonie
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Bill said
It tells you how the 5.51% is calculated, i.e. over 200 monthly periods, looking back 5 years each, starting sometime in 2001 (check out the specifics in the downloadable pdf on the site).

Swings are irrelevant, average return is - e.g. 0%, 2% and 8% over 3 years (i.e. outcomes below the average 67% of the time) still beats 3 years of steady 3% each. You can do what you want with numbers, true, but average of 5.51% still beats any lower number average no matter how wild the ups and downs.  

I can only find one downloadable pdf about the Tech GIC, called "Fact Sheet". While it does give a formula about how the return would be calculated, it does not give any results of actual past performance.

For most of their other index-linked GICs, they have an additional pdf which does show actual returns. It's called "Performance Results". If you have located this for the Tech GIC, could you please post the link? thx.

May 4, 2018
3:07 pm
Loonie
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Top It Up said

Loonie said
There is no reason to buy a market-linked GIC except to participate in the market. An ordinary GIC will always pay a better guaranteed return.

First off let me say that I've never liked mutual fund-type investment instruments and have never invested in them BUT, having said that, I totally disagree with this statement. The REAL problem with this offering is the elimination of the top 4 performers, the non-credit of dividends, and the maximum cap - remove those conditions and the return on this investment will make any return on GICs look like absolute chump-change.

Again, the ONLY way to get any pop in your accumulation to wealth path is through the stock market OR through a substantial inheritance from your grandma. Playing with GICs, is for old folks.  

You're entitled to your perspective, of course, but it has nothing to do with the truth of my statement.
Your complaints about this GIC, perfectly valid, were already mentioned in earlier posts by myself and Norman.

May 4, 2018
3:28 pm
Bill
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I can find no Performance Results or past performance data for this product, presumably because it's new.

The Fact Sheet says "Compound annual returns over the term of the product were calculated by applying the current features of the guaranteed investment over the last 200 5 year periods ending each month between July 31, 2001 and February 28, 2018." That's all I've found.

May 4, 2018
4:35 pm
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Loonie said
There is no reason to buy a market-linked GIC except to participate in the market. An ordinary GIC will always pay a better guaranteed return.  

For greater clarity, if Meridian's offering was an unencumbered offering, the return would blow the doors off a silly 3.5% 5-year GIC - guaranteed.

May 4, 2018
6:44 pm
Loonie
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Top It Up said

For greater clarity, if Meridian's offering was an unencumbered offering, the return would blow the doors off a silly 3.5% 5-year GIC - guaranteed.  

That is an IF that simply doesn't apply, thus irrelevant. Nobody is arguing with you about that.

It's not that you aren't clear; it's that, in your ever-present eagerness to disagree with me, you didn't pay attention to what I actually said.

May 4, 2018
6:55 pm
Loonie
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Bill said
I can find no Performance Results or past performance data for this product, presumably because it's new.

The Fact Sheet says "Compound annual returns over the term of the product were calculated by applying the current features of the guaranteed investment over the last 200 5 year periods ending each month between July 31, 2001 and February 28, 2018." That's all I've found.  

Thanks, Bill. Yes, that's all I found too.
So, I think we can't assume that anyone has yet actually ever made any money on this GIC. A minor point, perhaps, but part of the whole story.

I don't know what they mean by "compound" returns in this case.
I wonder why they chose this particular time frame over which to make their calculations. It would take a serious computer geek (not me!) to figure out what this meant in the terms Norman was considering.

May 4, 2018
7:10 pm
Bill
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Going back 17 or so years makes sense to me, it was around 2001 when the majority of American households for the first time had internet access, thus marking in a way the beginning of the modern ubiquity of the online world that led to the rise of the tech giants we know and love today. I guess.

May 4, 2018
11:15 pm
Loonie
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Yes, that makes sense. Perhaps that's as far as some of these companies go back.

It also avoids including the bursting of the dot.com bubble in 2000. A number of companies which might otherwise have been included failed then.

May 5, 2018
8:17 am
Bill
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Actually the Fact Sheet wording suggests the first 5-year period ended July 2001 so the performance is actually measured back to beginning mid-1996.

May 5, 2018
10:43 pm
Loonie
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I see. thx

May 7, 2018
6:38 pm
savemoresaveoften
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No need to over analyze Meridian’s motive, banks typically makes about a few %on the principal amount in these equity linked notes, the financial advisor gets a cut (similar to mutual funds).
From investors’ perspective, do u want risk free 3.5% per year for next 5 years = 17.5% guaranteed return (simplified, ignore compounding), or willing to risk 0% but potentially gain max of 50% over same period ? There r different variations of these notes, discarding top n worse performers are typical. Other more exoctic notes may offer features such as ‘capping return’ of individual stock’s return once it’s reached. E.g max of any constituents to be capped at 50%.

May 8, 2018
5:22 pm
mmlt
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My banker is a salesman. Always trying to get me interested in whatever makes the bank the most money. These tech and market linked offerings need to be given considerable thought.

September 24, 2018
8:42 pm
maxb
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Market Linked GIC's can be purchased by individuals under the age of 18 !!!!

Otherwise, minors are shut out of the equity market.

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