Laddering GICs from different financial institutions or not? | GIC discussions | Discussion forum

I think you are asking which one we would choose?

In my opinion, much depends on how much money you are talking about in total, how keen you are to get best rates or better ones and on whether you want to put your money in banks or CUs..

If you have, say, a million for GICs, and you want only banks, you might be better off with discount brokerage as the insurance limits are so low and you will find yourself too busy keeping track of everything.
If you have something under, say 400K, and you are keen to grow it as much as possible, then a ladder spread over a few FIs is quite manageable, even with banks.

Once you get to about 500K or more, banks become unwieldy as you will need at least2 for each step in order to be insured.

If you like CUs, it's much easier and you can go over a million without creating too much work for yourself because of higher insurance limits. Ontario has 250K for non-registered, unlimited for registered; and MB has unlimited period.

You might also consider a "middle way", namely using a deposit broker. They generally offer some higher rates than discount brokers. They carry both CUs and bank GICs, and they will offer you what they have in descending order of rate. You just choose the one you want.
It can be a bit more inconvenient getting the money to them, but not much.. It may depend on what is available where you live. Works for me but I also buy independently. Increasingly, I am using CUs, for the higher insurance, which f makes it easier for me, and often better deals, but that too depends on where you live.

You will probably find a lot of enthusiasm on this forum from those who advocate discount brokers. Most of them seem to already have discount brokerage accounts. and prefer banks.

I could not pass the G&M paywall but I see the article was written by Heinzl. FWIW, this is not a writer I have a lot of faith in based on many previous articles. He always seemed to me to be trying to prove something he'd already made up his mind about.

What I have read elsewhere is that ladders are advantageous about 85% of the time. The other 15% were less clear but appeared to be when there are inverse rates. I can't prove that but perhaps something to look into. I am only going out 3 yrs max on my ladder now, but that is in large part because I am old, might not be here in five years, might want access to more money sooner.

althisa said
Considering starting an investment ladder consisting only of GICS. Apparently its still a sound strategy even with an inverted yield curve. A useful article I could find is: https://www.theglobeandmail.com/investing/education/article-the-case-of-the-upside-down-gic-rates/

Do you shop around for the best GIC interest at different FIs for each year/step of the ladder. I could see this becoming a paperwork nightmare.

Alternatively if you have a brokerage account, the GICs from other FIs with different interest rates for different durations are available for purchase under the same account. It may not be the 'best' GIC rate for that duration for the FI, but there is some level of correlation with the best rate.

At least the tracking and accounting under the same account for a GIC ladder is manageable?  

Protect your asset and stay within the CDIC limit even if you have to open GIC in multiple FI, since Canada is sitting on the largest housing bubble of all time stay with the Big 6 if possible with a bit of rate cut as an extra insurance.

Shortening your maturities makes sense if you think interest rates will rise. What you are talking about is essentially a bet on interest rates.

Seems an unnecessary play in terms of risk/reward ratio simply because products available to you in 1 year are at least as likely to offer worse returns and in the event you gain its likely to be very little.

Either way your relative loss will be limited unless something crazy happens to inflation so its not a big deal.

I ladder conventional 5 year, hold monies in multiple accounts, for myself, my wife and joint accounts. In that way I can roll rather easily on renewals and select the best rates at time of maturity. Easy to manage over 1M that way. I don’t time the rates and am willing to stick with the ladder as it meets with our critieria for fixed income allocation

With laddering you are always getting the best and worst rate within a 5 year window.

IMO, that is the most important fact about laddering. If you don't value this stability and removal of decision making over taking risk for higher returns, then I don't think laddering is right for you.

I use laddering, too, but when each tranche comes due I look at the yield curves and decide what term (or terms) to invest in for the best rate while leaving myself enough cash maturing in the next few years. I generally have 2 tranches coming due each year, and using the TFSA/non-reg/RRSP CDIC classes - along with some institutions that have more than one institution status (such as Home Bank/Trust and some banks) as well as BC credit unions (no insurance limit) I don't have much worry about exceeding limits.

In the summer, I took some 5-year and some 3-year; this month I took a healthy 2-year and got it bumped within 10 days. I have started to think about my lifespan and may shorten things in the future, but still have some 5-years waiting to mature.