What are foreign currency GICs?
When you invest in most guaranteed investment certificates in Canada, you do so in Canadian dollars. However, if you travel often, or own property elsewhere in the world, you can also choose to invest in foreign currency GICs. Foreign currency GICs are simply GICs holding another country’s currency. The most common foreign currency GICs in Canada are U.S. dollar-denominated, but you may also be able to invest in Euro, British Pound and Japanese Yen GICs.
Why invest in foreign currency GICs?
A foreign currency GIC gives you access to the currency of its associated country, should you need it in the future, and earns interest while it’s invested. But foreign currency GICs are not just a great option for travellers. Most investors follow both the Canadian and U.S. dollars. If you suspect the loonie will significantly decline in the coming months or year, investing in a U.S. currency GIC would allow you to profit from the drop. So adding a foreign currency GIC to your investment portfolio would allow you to diversify your money and preserve your purchasing power.
Are there any drawbacks to investing in foreign currency GICs?
Two things to consider, before you invest, are that: 1) foreign currency GICs are not covered by CDIC insurance, which means your principal is not protected, in the event that a financial institution fails, and 2) interest rates on foreign currency GICs are typically quite low, compared to Canadian GICs.
Best GIC Providers