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URL:  http://boards.fool.com/gic-guaranteed-investment-contract-its-an-19795200.aspx

Subject:  Re: 401(k) stable fund???? Date:  11/1/2003  7:29 PM
Author:  CAMPCITY Number:  37657 of 76420

GIC - Guaranteed Investment Contract.

It's an agreement, usually between an Insurance co and a pension plan (your 401K and others in the fund) That guarantees a rate of return.

The rate is usually low (you are dealing with insurance companies - not known for paying anyone much of anything)in the first place. The fact that it is a fund says that your principle, your hard earned 401K dollars are not guaranteed e.g., Stock Funds, Bond Funds, etc. Funds experience administrative costs, taxes and sometime loosing investments.

If you have more than 5 years before you need that money you would probably be better off in a AAA rated municiple bond. Provided the municipality does not default, your monthly interest payments and principle (face amount of the bond) is guarranteed at maturity e.g., end of a 5 year bond.

If you are talking about a significant amount of money here, I recommend the advice of a professional (one that does not receive a commission on what he recommends to you). It will cost you a few bucks, but I bet it will be less than 14%.

campcity
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