Guaranteed Investment Certificate

A deposit investment security sold by Canadian banks and trust companies. They are often bought for retirement plans because they provide a low-risk fixed rate of return. The principal is at risk only if the bank defaults.

The bank’s profit is the difference between mortgage rates and GIC rates. If mortgages are at 8% and GICs are at 5%, then the bank makes 3%.

GICs offer a return that is slightly higher than T-bills.

Term Deposits

A deposit held at a financial institution that has a fixed term. These are generally short-term with maturities ranging anywhere from a month to a few years. When a term deposit is purchased, the lender (the customer) understands that the money can only be withdrawn after the term has ended or by giving a predetermined number of days notice.

Term deposits are an extremely safe investment and are therefore very appealing to conservative, low-risk investors. By having the money tied up you'll generally get a higher rate with a term deposit compared with a demand deposit.

Treasury Bill (T-Bill)

A short-term debt obligation backed by the Canadian government with a maturity of less than one year. T-bills are sold in denominations of $1,000 up to a maximum purchase of $5 million and commonly have maturities of one month (four weeks), three months (13 weeks) or six months (26 weeks).

T-bills are issued through a competitive bidding process at a discount from par, which means that rather than paying fixed interest payments like conventional bonds, the appreciation of the bond provides the return to the holder.