- Investing School - https://investing-school.com -

What is a Guaranteed Investment Fund (GIF)?

A guaranteed investment fund [1] is similar in nature to mutual funds [2], in that it is a group of assets [3] put together by a portfolio manager with the goal of meeting specific investment objectives.

The difference is that this fund is offered by insurance companies and the assets can be invested in an equity [4], bond [5] and/or index fund [6] while guaranteeing a minimum value at maturity or when the investor dies. The insurance company running the fund charges quite a bit for this guarantee: up to 1% of your investment annually.

The advantage to placing funds in a guaranteed investment fund is that you are certain to recoup your investment. Furthermore, if your fund has a particularly good year you can opt to reset the guarantee at the higher value. The problem is that it can be very difficult to figure out how such a fund performed in comparison to normal mutual funds since the structures are so different.

Deciding between the two funds is matter of personal need and the advice of a good financial expert. If your goal is to provide additional security [7] for your family or heirs then a GIF [1] may be a good option, especially if it is run by a well known, reputable insurance company. The fund should also sport a good record of success.

The Guaranteed Investment Fund should not be mistaken with the Guaranteed Investment Contract [8]. The latter is an insurance contract that guarantees the owner both the repayment of principal and a specific interest rate [9] for a preset period. This is a fund that is usually offered to institutions rather than individuals.