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What are the advantages and disadvantages of these new stock market-linked GICs banks and trust companies are offering?

These products give you a chance to earn more money than you otherwise might from a standard interest-paying GIC -- if the stock index to which they are linked rises.

On the other hand, you could actually end up with less buying power because of inflation. Unlike an ordinary GIC, these products generally do not offer a guaranteed return. If the stock index falls or marks time, you merely get your initial investment back. Which could mean a big loss in terms of your buying power since most of these GICs have a term of betweeen two and five years.

Stock market-linked GICs may appeal to you if you want a shot at higher returns, but also want a guarantee of at least having your principal repaid.

Some stock-linked GICs tie their returns to the S&P/TSX 60 Index.

If the stock market index tied to your GIC rises during the term of your investment, you gain. But on many of these products, you don't get the full gain. The interest paid to you is a percentage -- 80 per cent in some cases -- of the rise in the index. Some allow you to cash out early at one or two set times and take your allowed share of the gain generated by the index. In that case, what you originally invested stays with the bank until the end of the term you selected -- and it generates no further return for you.

Other index-linked GICs may set a limit another way for example, by capping your percentage gain at 20 per cent. Financial institutions do not use the total return stock index as the basis for calculating your return. Gains from dividends paid by the stocks that make up the index are not counted.

Since gains on these GICs are taxed as interest rather than as capital gains, you pay tax at your full marginal tax rate.