Investing Unit 5: Guaranteed Investment Contracts

• Introduction
• Unit 1: Basic Building Blocks of Successful Financial Management
• Unit 2: Investing Basics
• Unit 3: Finding Money to Invest
• Unit 4: Ownership Investments
• Unit 5: Fixed-Income Investing

• Certificates of Deposit
• Series EE and I U.S. Savings Bonds
• Money Market Mutual Funds
• Bonds
• Unit Investment Trusts
• Bond Mutual Funds
• Mortgage-Backed Securities
• Annuities
• Preferred Stock
• Guaranteed Investment Contracts
• Five Tips for Fixed-Income Investors
• Summary
• Action Steps
• About the Author

• Unit 6: Mutual Fund Investing
• Unit 7: Tax-Deferred Investments
• Unit 8: Investing Small Dollar Amounts
• Unit 9: Getting Help: Investing Resources
• Unit 10: Selecting Financial Professionals
• Unit 11: Investment Fraud

• Study Guide
• Action Steps
• Monthly Investment Messages
• Glossary

Called GICs for short, guaranteed investment contracts are fixed-income contracts issued by insurance companies as an investment option for 401(k) retirement plans. Another commonly used name for GICs is “stable value funds.” Like CDs, only tax-deferred, GICs pay a fixed-interest rate for a specified period of time (e.g. 3 to 5 years). Because they are backed by an insurance company, and not the federal government, GICs generally pay a higher return than CDs and other cash investments. Their return is lower than stocks, however, leading to criticism that they are inappropriate for long-term financial goals like retirement.