What is a laddered GIC?

A laddered Guaranteed Investment Certificate (GIC) is designed to spread investment across various term lengths, which allows for opportunities to access funds at different intervals while still benefiting from potentially higher interest rates associated with longer-term investments. By dividing the investment evenly, an investor will purchase multiple GICs with short, medium, and long-term maturities. This approach helps to reduce interest rate risk since when one GIC matures, the investor can reinvest the principal at current prevailing rates, which might be more favorable than the rates locked in at the initial investment time.

This strategy also enhances liquidity, as a portion of the investment becomes available periodically. It provides a balance between access to funds and locking in higher interest rates, making it a more flexible option than investing in a singular, long-term GIC, which does not allow for early redemption without penalties. Hence, the characteristic of having different term lengths is what properly defines a laddered GIC.