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What are Index-Linked GICs and Principal Protected Notes? |
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Principal Protected Notes (PPN)
The original principal investment is guaranteed by the financial institution issuing the notes. These notes are linked to the performance of different underlying investments such as stocks, mutual funds or even options. Some notes offer monthly income plus the potential for capital appreciation while others offer just the potential for capital appreciation. Some notes also offer tax preferred treatment of income earned. Principal Protected Notes appeal to those looking for a guarantee of their initial investment with the potential for better returns than GIC’s. These notes are not CDIC insured.
Index-Linked GIC's
Potential for higher returns based on the performance of a specific stock market index such as the TSX or the S&P. Some cap the return of the index while others allow you to participate up to a certain percentage of the index's total return.
Mutual Fund Linked GIC's
Potential for higher returns based on the performance of specific Mutual Funds.
Some mutual fund linked GIC's also offer a minimum return of at least 1% per year paid at maturity.
Active Management GIC's
Potential for higher returns based on an "active management" approach, designed to benefit from all capital market fluctuations, whether up or down. An Active Management GIC includes investment strategies and instruments that are not always easily accessible to investors such as: currencies, options, short sales, publicly traded shares, bonds, etc.
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