Index-linked

Market-linked term deposits*

Performance — Often called index-linked GICs, these products offer a guarantee of your principal, with a rate of return tied to growth in the stock market. Returns are based on the performance of the S&P and TSX 60 index.**

You can take advantage of gains in the market indices and be fully protected if market values drop.

Blue-Chip Growth —The S&P/TSX 60 Index tracks the top 60 companies in leading industries in Canada. This index provides economic diversity over market sectors including:

    •    Basic materials
    •    Capital goods
    •    Communication services
    •    Consumer cyclical
    •    Consumer staples
    •    Energy
    •    Financials
    •    Health care
    •    Technology
    •    Transportation
    •    Utilities

Security — Your principal has government-backed deposit insurance protection, through the Deposit Insurance Corporation of Ontario, up to $100,000. Index-linked term deposits are also RRSP-eligible, and accordingly have unlimited insurance when held in an RRSP. So no matter what happens in the stock market, you are guaranteed the return of your principal when your deposit matures.

Who should consider an index-linked term deposit?

1.     Investors looking for a higher return than the return paid on fixed-rate deposits.
2.     Investors looking for an equity-linked investment that carries no fees or commissions.
3.     Individuals searching for a diversified investment in Canadian corporations.
4.     Conservative individuals who are not willing to risk their initial investment.

Calculating the return

1.    The investment return on the deposit will be based upon the participation rate — 50% for a three-year deposit and 100% for a five-year deposit — multiplied by the average return of the S&P/TSX 60 Index over the term of the deposit.

2.    The average is calculated by adding the monthly averaging date closing values for the S&P/TSX 60 Index between the start date of the investment and its maturity date, and then dividing that total by the months in the term: 36 for a three-year deposit and 60 for a five-year deposit.

3.    That average is then compared to the opening value of the Index to determine the percentage change.

4.    The averaging protects the investment from severe short-term market fluctuations.

5.    The investor will receive the percentage difference between the average and the starting value, multiplied by the participation rate.

Risks — Unlike other term deposits, there is no guaranteed return on this product. Depending on the performance of the stocks that make up the S&P/TSX 60 Index over the term, it is possible that at maturity, investors will receive only their principal back.

 


* Available during RRSP season only.

** Standard & Poor's® and S&P® are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Central 1 Credit Union Limited and sublicensed by the Credit Union. TSX is a trademark of the Toronto Stock Exchange and has been licensed for use by Central 1 Credit Union Limited and sublicensed by the Credit Union. Index-linked term deposits are not sponsored, endorsed, sold or promoted by Standard & Poor's or the Toronto Stock Exchange, and neither party makes any representation regarding the advisability of investing in these deposits.

 

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