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Every penny counts at TD
March 31, 2018
3:59 pm
Loonie
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Mary said

She must think that because I'm old, I'm stupid!!

Ageism at its best! First I applaud TD to actually be ingested in helping you but on the other hand I feel most bank employees are brainwashed with THEIR brand of training.

 

I presume you meant "invested", although "ingested" raises interesting images!! Perhaps they are eating my words!sf-laugh

I don't see that they're invested in helping me at all, though. What they're invested in is helping the bank.

If they wanted to help me, they wouldn't be pushing an account at me that they know perfectly well pays less than the one I am using elsewhere.
And they wouldn't be pushing a GIC claiming a return of 4 or 5% when there really is no such thing - hoping i wouldn't know the truth.
And, most of all, they wouldn't be trying to convince me that you lose more in taxes and inflation on an account that pays a higher rate of interest than you do on one that pays less!! The latter was a new twist; I'd never heard that one before!

Bottom line: it seems they'll say anything they can get away with, and truth is irrelevant.

it's interesting though, to see the strategy. First you try to sell them on a 'high interest" account which isn't; then you move on to market-linked GICs offering a rate which isn't. Mutual funds would likely be next (no doubt associated with promised returns that may or may not be achieved), but I think she could see that it was not worth raising this with me. No doubt they go to training sessions to learn this!

April 1, 2018
9:41 am
Kidd
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I have NOT read all the posts in this thread. So this may have been said.

Canada does not have a penny. So they owed you 10 cents.

April 1, 2018
10:50 am
Doug
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For what it's worth, the banks and credit unions have been improving stock-indexed GICs, now known as market-linked GICs. When I was a kid (these were one of my very first investment vehicles in the early '90s and I did fairly well with them), they simply guaranteed your principal but did not guarantee any return, though they offered potentially greater returns (which the banks "capped" how much of that return would be captured, sneaky buggers!sf-cool). Certainly, a better offering than mutual funds, which had higher fees and couldn't make the same principal guarantee.

In early 2008, shortly after starting with HSBC, I "bit" again and bought a $1000 stock-indexed GIC locked in for 3 years that, at maturity, earned me 0%. Thankfully, it was only $1000, which I promptly transferred into a mutual fund RSP at the time and now it's co-mingled with my single, self-directed Scotia iTRADE RSP assets.

Now, though, I'm frequently seeing them promise either a "minimum rate of return," in addition to the principal guarantee, or a market-linked return, whichever was higher. Coast Capital Savings had, I believe, a 3- or 5-year market-linked GIC in October that had the potential return of 6-7% compounded annually or 2.5%. That was slightly less than the top rate regular GICs, but the upside potential was greater. In that scenario, I think they have a place.

Cheers,
Doug

April 1, 2018
12:18 pm
Loonie
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You'd be right if it were cash, Kidd; but she just credited my account. Electronic pennies still exist.

Doug, market-linked GICs may have a place for some people some of the time, but to tell me that, instead of the better-than-TD-rates that i am getting elsewhere, that she can offer me 4 or 5% is just a plain old fib. In my view, they shouldn't be even allowed to call these things GICs, as that is misleading. You can't compare apples with oranges.

I have been following the offerings in this area. I think you have misinterpreted the offering at Coast Capital. They have done what many other FIs also do, namely made you think they are offering a minimum of 2.5% per annum, when in fact it is over the entire 3 year term, so it's 0.83% per annum, in no way competitive with GICs.
It's a common strategy,often accompanied by bold headlines.

The other thing to watch out for is "participation rates". They should be 100%, meaning that you will get the benefit of whatever market upturn takes place. However, some are only 75% or so.

Thirdly, beware of Canadian equity market-linked GICs with large cap familiar names like the banks, Bell, etc. You would probably do better just to buy the stocks. These companies give good dividends and you will not receive a penny of them through market-linked GICs.

Any profits from market-linked GICs held outside of registered plans are taxed as interest. If you'd bought the stocks, you'd have the benefit of lower taxes through dividends and capital gains.

And, lastly, if you just went and bought the stocks or the ETFs, you could choose your exit date when the price was right for you. It would be more than annoying to find , after five years, that the gains you'd been steadily building for four years just happened to vanish in the year your GIC matured.

I guess they're OK for someone who is very timid but wants to test the waters of the stock market - Someone even more conservative than I - which is going some!

All in all, I think it's very difficult to make enough money with these things to justify them. I think they were a better product before they introduced the caps.

Between the participation rates and the caps (which tend to be quite low), there isn't much upside left in many of these funds, and even then you have to be lucky. I'd rather be in control of when to get in and out and to get the entire yield.

April 1, 2018
5:42 pm
Top It Up
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Loonie said
I have been following the offerings in this area. I think you have misinterpreted the offering at Coast Capital. They have done what many other FIs also do, namely made you think they are offering a minimum of 2.5% per annum, when in fact it is over the entire 3 year term, so it's 0.83% per annum, in no way competitive with GICs.  

Coast Capital were straight forward on their website, on that particular offering, they weren't hiding it or trying to dupe anyone.

IF you don't like the offer just move on.

April 1, 2018
6:09 pm
John Wayne (Marion)
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Kidd said
I have NOT read all the posts in this thread. So this may have been said.

Canada does not have a penny. So they owed you 10 cents.  

Ahhhh just splitting hairs here. Physically we have no pennies BUT one cent still exists on paper and electronically.

April 2, 2018
9:05 am
Nehpets
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Loonie said
The other thing to watch out for is "participation rates". They should be 100%, meaning that you will get the benefit of whatever market upturn takes place. However, some are only 75% or so.

Loonie,

Thanks for your comprehensive critique of market-linked GICs that never appealed to me, but I did not fully understand all the factors that undermined their effectiveness.

Would you elaborate on your comment about participation rate....are you referring to the participation rate of the number of investors in a given fund?

Stephen

April 2, 2018
10:34 am
Loonie
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You're welcome, Stephen.
No, it's not the number of participants. Perhaps it would help to remember that they are not funds per se, so some things that might be relevant to funds are not relevant to these "GIC"s. Neither is it a groupon-type-thing where a certain number of people have to sign up to make it a "go" (lol). This is a rate that is dictated to you by the FI for a given type of market-linked GIC. Permitted participation rate will vary among different ones that they offer.

Essentially, it means that whatever return you might have gotten according to all the other criteria in this investment is further discounted if the participation rate for the GIC (laid in stone as a condition at the outset) is less than 100%. So, if you were supposed to get 30% at the end of your 5-yr GIC because the index went up 30% (averaged out in the bank's unique formula), but your participation rate was 80%, you would in fact only get 24%.

Rather than dig into it further myself, you might find these articles explain it better:

https://www.thestar.com/business/personal_finance/2014/02/02/you_can_profit_by_avoiding_packaged_gics_roseman.html

https://www.ratehub.ca/gics/market-linked-gic

From what I have seen, the trend seems to be more towards capping the return you can get (e.g.20% over 5 years is not uncommon, and many are lower than that) rather than limiting the participation rate.
Perhaps customers found the former easier to swallow, but it amounts to something similar. The cap, however, seems to me to be even more to the bank's advantage than the participation rate limit. Most caps are (5% X number of years in the GIC) or less, and most are less. With the caps that are in place now, it's hard to see a potential advantage over a regular GIC , bearing in mind today's rising rates and long bull run. If I can get 3.5 or 4% guaranteed over 5 years, why would I want to risk getting less or even nothing for the sake of a maximum possibility of 5? Personally, I would choose dividend producers any day over these.

I should have asked this woman if she owns market-linked GICs herself!

April 2, 2018
11:16 am
Nehpets
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Loonie said
Rather than dig into it further myself, you might find these articles explain it better:
  

Thanks for the additional info along with the informative links, Loonie!. It's always a good day for me when I learn something new.....sf-smile

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