Commercial Paper Commercial paper securities are short-term promissory notes issued time to time by major corporations. They typically have maturities from 30 to 270 days, and fairly high minimum amounts like $10,000. The only asset securing these investments is the financial strength of the issuing company. Historically, this has been quite good. Com- mercial paper may be purchased through broker/dealers and com- mercial banks. These are considered money market investments because they are shorter-term, high quality securities. Most often, commercial paper is purchased by money market mutual funds and other lenders that are interested in short-term, liquid investments. The interest and any gain on commercial paper are fully taxable.
Guaranteed Investment Contracts Within many employer-sponsored retirement accounts, such as 401(k)s, guaranteed investment contracts (GICs) are an option. GICs are fixed-interest-bearing contracts generally issued by insurance companies. Since they are purchased through retirement plans, they are, in essence, a contract between the employer and the issuing com- pany. The issuing company accepts funds for investment for a spe- cific period of time during which the money will earn a guaranteed interest rate or rates, and guarantees both the GIC’s principal and interest for the specified time period. The participating employee may then elect to invest all or some of their money in the plan’s fixed- interest account, to the extent that the plan allows. It’s through the GIC that the plan provides for the fixed-interest account. The employee’s money may stay in this account for as long as the employee wishes, or for as long as the GIC lasts. Typically, GICs have maturation periods of three to five years. At maturity, the employer and issuing company may enter into a new GIC. This new GIC may have a different interest rate, given the current interest rates and market conditions. Representative current GIC interest rates for certain amounts and time periods may be found in the financial pages of some publications.
GICs are backed by the issuing company. Therefore, when con- sidering investing your money through a GIC, you should take a look at the financial soundness of the issuer. There are state guaranty