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High Risk Guaranteed Investment Certificates

Given the low-interest rates on GICs, investors often select the product with the highest rate. Currently, two of the highest rates offered are by Oaken Financial and Home Trust. These are products offered by Home Capital and it is unclear if this company will continue as a going concern. The company needs capital, so they are offering higher interest rates than competitive products.
Given the risk, this provides two potential strategies for investors:

1) The possibility of bankruptcy exists so avoid these products; or

2) Since these products appear to be covered by the Canada Deposit Insurance Corporation, investor losses are covered for losses up to $100,000. Thus, investors can purchase these products in amounts of less than $100,000, obtain the high rates and if the company goes bankrupt, the government will reimburse their investment. There may be a lengthy period of time between when the company cannot make the payments and the government provides a reimbursement.

Warning – Under no circumstances should an investor purchase a GIC from Oaken Financial or Home Trust in excess of $100,000.

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