This copy is for your personal non-commercial use only. Banks push market-linked GICs during RRSP season, but smart investors don't buy them. An Alberta bank has decided not to sell them altogether. While using a CIBC bank machine, I saw messages about how smart it was to buy a stock market advantage GIC. My principal was per cent guaranteed. Yet I could benefit from the higher return potential of the stock market.

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Sounds like a win-win proposition, right? Most banks promote similar products for RRSPs.

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ATB Financial has decided not to sell index-linked or market-linked GICs. Formerly known as Alberta Treasury Branch, this crown corporation has branches in the province and , customers.

Market-linked investments can be hard to explain and the return calculation can be hard to understand. You deserve to know how your investment is doing over time.

Stock markets move up and down. The bank recommends a traditional GIC for risk-averse savers who are willing to accept a lower rate of return. To get a potentially higher return, you can put some money in a GIC and some in a mutual fund.

By doing this, ATB is putting the interests of clients ahead of its own interests. Securities regulators have warned about problems with market-linked GICs. InvestRight, affiliated with the B. Securities Commission, points out that many such GICs limit the amount you can earn.

Some have a maximum performance guarantee, so that you receive a return only to the stated maximum, no matter how much the market went up. You opt for a three-year term and the market goes up 10 per cent annually for three years. Financial planner Ed Rempel shows how the calculation works at the Million Dollar Journey blog.

The GIC takes an average of the last year, so it picks up only half the gain of year three. Then, it adds 10 per cent from year one and year two, resulting in a three-year gain of 25 per cent.

You then offset the 25 per cent gain by the 60 per cent participation rate — meaning after multiplication you have a market return of 15 per cent.

While the index rose 30 per cent in this case, the index-linked GIC rose 15 per cent. Index-linked GICs generally exclude dividends when showing how a market performed. They look at the change in the index without dividends, which can represent a large chunk of the returns. The products seem simple, especially if you read the advertising slogans. Try printing out the information statement for the CIBC index-linked GICs.

Keep your GICs separate from your stock market investments. You can decide when to sell and can take advantage of market movements.

Ellen Roseman writes about personal finance and consumer issues. You can reach her at eroseman thestar. The Toronto Star and thestar. You can unsubscribe at any time. Please contact us or see our privacy policy for more information. Copyright owned or licensed by Toronto Star Newspapers Limited. To order copies of Toronto Star articles, please go to: Punjabi superhero hit partly filmed in Canada says it adds comedy and romance to recipe. Please upgrade your browser. Search the print archives.

By Ellen Roseman On Your Side.

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