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Preference for GICs will grow as interest rates rise

(NC) Since the advent of the economic downturn, Canadians have experienced several years of historically low interest rates. As a result, enthusiasm for traditionally safe investments such as Guaranteed Income Certificates (GICs) – which typically have returns directly tied to interest rates – has waned.

A new BMO survey suggests that this diminished interest in GICs as part of an investment portfolio will remain in place as long as interest rates remain low. The survey found that, if promised an annual return of 2 per cent, only 14 per cent of Canadians say they would purchase GICs within the next year.

However, if the rate of return were to rise to 3 per cent, the number of Canadians who say they would purchase GICs jumps to 38 per cent. With nearly half of Canadians expecting interest rates to increase in the next five years, and BMO Economics projecting a rate increase by the Bank of Canada in the second half of 2015, the long-term potential for GICs to grow in popularity is clear.

But even before rates rise, attractive GIC options are available to investors today. As an example, those who wish to get all the benefits of a safe investment and competitive returns could consider the 3-Year BMO RateRiser Plus GIC. This GIC provides the best of savings accounts and investments combined, with guaranteed competitive returns that increase annually along with the flexibility for investors to access their money each year.

For more information on how to incorporate guaranteed investments into your portfolio, visit a local BMO Bank of Montreal branch and speak with a BMO investment professional.

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