Pros and Cons of Investing in a Guaranteed Investment Fund

In today’s financial market, investors make use of different types of investment tools or instruments depending on their expectations and needs. While some of these instruments are made to safeguard funds, others are made to maximize return on investment. However, when an investment instrument promises higher returns, risks associated with such instruments also tend to be high. Similarly, the risks associated with instruments, which promise relatively smaller returns, would also be generally low. guaranteed investment fund (GIF) is a similar instrument, which is considered one of the safest ways to invest money.

Pros of investing in a guaranteed investment fund

According to Investopedia, a guaranteed investment fund is an investment product offered by insurance companies. It allows the client to invest in an equity, bond, index fund etc. with the promise that an agreed percentage of the fund, usually the initial or the principle investment, will be made available at maturity to the client or else to the beneficiaries of the fund, in the event of the client’s death. This means that even if the initial investment loses its initial value considerably, the investor would receive at least the principle investment at its maturity or in the event of the investors’ death.

Some insurance companies allow its GIF investors to ‘reset’ their initial investment after some time. This means that if the GIF undergoes a large gain, the investor can raise its capital to its new value. Therefore, the investor would now be guaranteed of a return, which would be the sum of the initial capital investment and the gain at the time of the ‘reset’, when the GIF mature despite the losses that it may incur after its initial gain.

Cons of investing in a GIF

While the GIF can be a great investment tool with regard to the safety of the investment, it may not be the best tool if the investor expects a considerable growth in his or her investment. The interest rate for a GIF is lesser than the interest rates for mutual funds and other stock investment tools. Furthermore, the company will charge an annual percentage fee in order to maintain the fund. This is in addition to the interest loss that may take place as a result of the changes in the inflation which may eat into the interest rate received for the GIF.


Thus, when talking about long-term investment of money, guaranteed investment funds are not always the best option for those who expect to gain the maximum out of their investment. However, for those who want to safeguard their investment as well as gain whatever possible by the time of its maturity, guaranteed investment funds may be the perfect tool among all investment instruments.