I have an DIY investing confession. A few years ago around 2013, when I had cash to invest, I left it lying around in my Questrade account for probably over a year. It was around $100,000. I think I was dollar cost averaging but not in huge amounts, and I was waiting for an opportune time to invest it. Eventually I just bit the bullet and invested most of it in larger chunks, but it took me a long time to take the action to do that. Too bad I didn’t have access to high interest savings ETFs at that time.
I did park some cash in high interest savings accounts (used the TD one) but I was annoyed at having to pay a $9.99 fee each time I moved money in and moved money out. It was painful to do when I’m supposed to be earning meagre interest on my cash!
It earned 0% interest for probably years. I didn’t want to put it in a high interest savings account because I didn’t want to wait so long for it to transfer from my high interest savings account to my discount brokerage.
In 2020, I had another cash surplus. At that time, I did it a bit differently, and I had been put some money into my investment portfolio to trade but the bulk of it was in high interest savings accounts spread among Motive Financial, EQ Bank, Canadian Tire, and LBC Digital Bank (LBC Digital I would not recommend). I put in a portion at a time into my investment account.
Here is where you can park your cash while you wait for an opportune investment (or a time when you feel safer to invest) and when you’re attempting to ‘time the market’ or when you’re slowly dollar cost averaging.
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Where to Stash Your Cash in the Investment Portfolio
There are different options of what you can do with the short term cash in your investment portfolio to earn some interest. As mentioned, you can purchase a high interest savings ETF.
High Interest Investment Savings Account
You could also purchase a high interest savings account or investment savings account within your brokerage. They are bought and sold like mutual funds (it is usually free if you have a TD Waterhouse account and you add the TD Investment Savings Account for example).
They do have a minimum to invest (for example, TD Direct Investing is is $1000) and they are covered by Canadian Deposit Insurance Corporation by up to $100,000. The interest is calculated daily and paid monthly. The settlement period of these funds is the transaction day plus one day, so it’s pretty quick.
For most brokerages, this would not be an additional cost.
Unfortunately, for Questrade though, if I were to put cash into a high interest savings account within the brokerage, I would have to pay Questrade a fee of $9.95 to buy and $9.95 to sell because it is considered a mutual fund.
Here are some investment savings accounts available and their rates (as of June 2022):
- TD Investment Savings Account TDB8150 (1.25%)
- RBC Investment Savings Account Series A RBF2010 (1.25%)
- BMO Investorline Investment Savings Account AAT770 (AAT770 Current interest rate is not available at present time)
The brokerages above consider these to be deposits and not mutual funds, but Questrade views them as a mutual fund and hence charges a $9.95 fee.
Another benefit for high interest investment savings is that you can have either USD or CAD funds with these (they have separate Fundserv codes).
Money Market Fund
Another option to park your cash while investing is a money market fund.
A money market fun is very liquid.
It is a mutual fund that invests in short-term debt securities, short-term notes issued by governments and corporations. Money market funds also have fees associated with them. These used to be very popular, but the interest rates are not as good as things like high interest savings accounts. Even though the interest rates are paltry, according to the IFIC, the Investment Funds Institute of Canada, Canadians had $27.5 billion sitting in money market funds in 2018.
What are the fees associated with money market funds? For example, the RBC Canadian Money Market Fund Series A has a MER (management expense ratio) of 0.19% and the return in 2021 was 0.10%.
Another example, the TD Canadian Money Market Investor Fund has an MER of 0.19% and assets under management of $1.6 billion. The 1 year return is 0.21%.
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Money market funds are not without risk.
The money invested in a money market fund are not covered by the Canadian Deposit Insurance Corporation (CDIC).
They are covered by CPIF (Canadian Investor Protection Fund) up to $1 million if your brokerage is a member of the CPIF.
Basically money market funds should not be where you stash your investing cash because of the low rewards and eroding returns. And yet Canadians are parking their cash in money market funds.
Questrade money market funds might not be worth it and your money will be better off elsewhere.
Finally for higher interest rate and middle ground with similar liquidity, there are high interest savings ETFs in Canada.
High Interest Savings ETF Canada
High Interest Savings ETFs (or HISA ETFs) are similar to high interest investing accounts, but they are not a mutual fund they are an exchange traded fund.
An exchange traded fund is similar to a mutual fund except that it is traded on the market when the markets are open.
With Questrade, there are no commissions charged when you purchase an ETF, only commission charged when you sell an ETF.
Therefore, buying a high interest savings ETF would be more economical than buying a high interest investment savings account if you use Questrade for your brokerage.
The best ETF to park cash in Canada should be one with a higher rate and low fees.
Here are a few High Interest Savings ETFs in Canada:
- iShares Premium Money Market ETF– CMR ETF has a 1 year return of 0.21%. As of June 25, 2022, it has assets under management of $305 million CAD. The MER is 0.25%. The ticker symbol is CMR.
- Purpose High Interest Savings ETF has $2 billion assets under management. The MER is 0.15%. The 1 year return was 0.80%. The ticker is PSA. The Purpose High Interest Savings ETF also has a US dollar version, and that ticker symbol is PSU.TO.
- CI High Interest Savings ETF has $2.61 billion assets under management and an MER of 0.14%. The inception date was June of 2019. The 1 year return is 0.70%. The ticker is CSAV.
- Evolve High Interest Savings Account Fund has almost $850 million assets under management. The 1 year return is 0.80% but the gross yield is 1.45% and they reduced their management fee to only 0.05% until December 31, 2022. The ticker is HISA and it is traded on the NEO exchange.
What’s the best high interest savings ETF in Canada? Well you can decide, there are a number to choose from, here are a few other ones mentioned by Globe and Mail.
What are the Risks and Benefits of High Interest Savings ETFs?
Interestingly enough, in this Investment Executive article, it says that some of the bigger banks or brokerages have blocked trades for the above high interest savings ETFs. I suppose to steer their customers towards their own products, the high interest savings investment funds.
Another benefit of the high interest savings ETFs is that they have a higher interest rate and much lower MERs compared to money market funds.
One downside to the high interest savings ETFs is that they are not as liquid as an investment fund. The high interest savings ETF trades like an ETF and security, and can take up to three days to settle. In comparison, the high interest savings investment fund takes one day to settle.
High Interest Savings ETFs are more liquid than high interest savings accounts though (I’m not talking about the one within the brokerage account). With a high interest savings account, you have to move your money with something similar to a ‘bill payment’ or ‘transfer’ and it can take anywhere from 2 to 5 business days for the money to transfer.
Related: Tangerine Investment Funds Review
High Interest Savings ETFs Summary
In summary, I think that if you have a brokerage like Questrade that charges for mutual fund transactions (e.g. Questrade high interest savings accounts and investment funds) you may be better off using a high interest savings ETF instead. There zero dollar purchasing ETF commission costs with Questrade (only when you sell, and even then it is $4.95).
Alternately, with Questrade you could also have your money in a high interest savings account earning higher interest and being CDIC protected, and just move small portions over to your investment brokerage at a time.
If you are with a big bank brokerage and you have access to free high interest savings investment account purchases, you’re better with that to keep your short term portfolio money in there (though it is only ‘earning’ 0.25%) but for longer term cash positions and holdings, I would probably stick to a high interest savings account and move money over when I am ready to invest the cash.
Related: Dividend Tracker Spreadsheet- A Free Download
Since I am with Questrade, I’m going to stick with using high interest savings accounts and transferring money over when I need it.
After all, I’m no day trader or anything.
If I have some time to wait before I invest my cash that might help me relax a little when investing my money. I will keep a bit of money to invest in the account anyway which will be enough to invest without going overboard.
Questrade users get Passiv Elite for free. Passiv helps you automate the rebalancing aspect so you know where to deploy your cash next.
I thought about buying a high interest savings ETF with the cash I have in my investment account, but decided against it since I have some limit orders that are on standby and I don’t want there to be not enough money available for the trade if it is all tied up in the high interest savings ETF.
If you invest using Qtrade as your brokerage, you can also buy GIC’s through Qtrade. Qtrade account holders can instantly open an account and shop for GICs from a variety of third party providers in their Qtrade platform. Investing in a GIC can be completed in a few clicks.
You may also be interested in:
- High interest savings joint bank accounts in Canada
- HISA vs GIC
- Why Cash Flow is More Important than Net Worth
- Canadian New Bank Account Promotions
- Qtrade vs Questrade review
What do you do with your short term cash in your investment portfolio?
GYM is a 30 something millennial interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for blog updates, a free dividend yield spreadsheet, and the free Young Money Bootcamp eCourse.
Interest rates are pretty sad right now 🙂 I guess you can always park the money and just shuffle it around if any good offers become available, like when Tangerine sends out their targeted higher interest rate offers. Even if you’re earning less than 1% right now, having lots of cash available in an uncertain market may lead to exceptional 5 or 10 year returns if the market completely tanks and you have your capital ready.
@Family Money Saver- Shuffling is too much effort for me. Hard to time the market, who knows if a March 2020 will come back again. All of June was basically positive except for a few days.
Great article GYM. I’m going to be in this position in a couple months. And of course not to forget the long arms of the tax man who will erode those paltry returns between 30-50% depending on marginal tax rates!
@Rick- Hah, paltry returns! Yes, that’s true. The incentive to put more of it in the market and at least get a 5% Canadian bank dividend yield is just so tempting!
Thanks for all this info. I like to park my currency in real money like gold or silver using an ETF. When you see how much the dollars have lost in purchasing power, you are not really gaining anything with the ridiculously low interest rates minus the loss of purchasing power.
Eventually, it will probably be easier to purchase cryptocurrencies like Bitcoin (through Questrade and in an RRSP, I hope).
@Michael- Thanks for sharing where you park your cash/ gold/ silver/ bitcoin 🙂 Yes, inflation is terrible. I have not invested in bitcoin, so don’t know much about it. Questrade will probably include that sometime soon.
Put all your money in bitcoin, its 100% guaranteed. Sell your house (you probably don’t have one) or sell your ps4 (I’m sure you have one of these). “Real money”
Another criptomaniac
We have monies sitting in different HISA accounts at financial instituons (CDIC protected) that currently provide the highest interests, these days they are Tangerine and RBC. Once a promotion ends, we will move our monies where the best promotions are to a maximum of $100k per account.
@JC- Thanks for sharing! I’m a fan of Motive and EQ Bank they both have >2% rates right now, but I think Tangerine and RBC have higher promotional rates right now.
I’m with you GYM, we keep our cash savings in a high-interest savings account (EQ Bank) and then just transfer it into our Questrade account when we want to make purchases. High-interest savings ETF’s seems like an added step of complication.
In the past, we kept very little in our savings account but have kept more cash on hand lately due to the uncertainty. Now that things seem to be stabilizing (at least for us personally) we will be transferring the cash out of our EQ Bank account and deploy it elsewhere.
@Maria- I think High Interest Savings ETFs make sense for investors who trade more often or watch the markets more closely, and who want cash to deploy quickly. That’s good that things are stabilizing and you are able to deploy your cash.
It seems that those high interest savings ETFs when considering the MERs, you’re ranging from 0.5% to a little over 1.5%; whereas HISA through banks (ie. EQ, Achieva, Hubert, Tangerine or RBC promos) you do get slightly better rates. So, if I understood your article correctly, and keep in mind my brokerage is also Questrade, the only real benefit of the HISA ETFs is having a few days faster access to cash in the event you want to excuse a quick trade?
With banks you have to initiate a PAD or bill payment and can take up to 5 business days, whereas the HISA ETFs, it would be trade + 2 days.
Right now, I have some money sitting as cash in Questrade account (not making any interest) to deploy on some CAD banks (ie. BNS and/or RBC) as they are still ~20% on “sale”, but the bulk of the cash is sitting in my Tangerine account as I’m still taking advantage of the promo rate. As you, I want to take advantage of the sweet dividends while the stocks are still on sale. Although “timing” is quite difficult, I think next quarter results will show most banks are losing money and that should reflect on the stock price, at which point I will pick up more shares and perhaps start new ones too.
@moneyhelp- Thanks for your comment! Yes, from what I understand the real benefit of HISA ETF it is faster access to cash. Sounds like we are doing the same thing in terms of parking our cash for investments. I think HISA ETFs are more geared towards day traders or people who trade more often, perhaps.
Simplii financial is offering 2.30 % til March 2021, and like JC move it around when the promo is over.
Great article, even if a bit dated. Question: Does the external (e.g. EQ) account method only work for a non-registered account? I presume so since it specifically states it can take up to 8 weeks to move RRSP funds out of an RRSP and into the EQ RRSP Savings Account. I presume that the 8 weeks would apply to moving funds in the other direction, i.e. out of EQ and into my RRSP trading account.
@Peggy- If you are transferring funds into your RRSP, for example, it should not take 8 weeks for EQ non-registered money to get in there, probably a few days max to fund your account (I am assuming you are talking about an RRSP contribution?). If you transfer your EQ money (non-registered) into an RRSP then that’s a contribution. They do have EQ RSP savings account though.
Thanks for the reply. No, I am talking about registered money. I am retired and looking to increase the yield on the fixed side of my RRSP investments. It also occurs to me that once I turn 71 and need to convert my RRSP into a RIF this wouldn’t work at that point also because EQ does not have a RRIF. I guess the only options for me are things available within my self directed RRSP. Hard to get any amount of return without risking my capital. As I expect rates to go up over the next few years I thought an investment savings account would be good to ride rates up and not risk the capital I need to live on in the next several years.
@Peggy- Ahh I get it and understand now. Yeah EQ bank doesn’t have a RRIF.
With a Bear market well under way at this time and interest rates rising, I went to cash in my trading account in May. Split my cash into 4 equal MM ETF positions: CSAV, PSA, CASH & CMR. My blended rate average is over 1% and rising. The last one (CMR) I have been using for many years in my RRSP and later in my TFSA when it was commission free at Scotia iTrade, but with the low rates in past couple years made no sense as it paid zero, since the MER was equal to the current low interest rate. CMR is no longer commission free at iTrade. TDWaterhouse will only let you trade CMR, the others not; iTrade no problem trading all of them. Bottom line, I want 100% liquidity available in seconds on the click of a mouse when the time comes to trade again, safety of capital, and something in the way of income while I wait. Margin accounts pay nothing for cash just sitting there. The advantage with the 4 ETFs is: 1) fully liquid in seconds and can be used for margin (buy stocks first, sell ETF later); 2) they pay monthly; 3) payments go up automatically as rates rise; 4) safe and relatively stable, up or down a penny. The Con: depending where you buy, trading commission will be a detriment, however if the funds you have are large enough, no issue as your first month’s interest payments will cover the initial costs. At this time, cash or MM are outperforming all market indexes as they do not lose money and pay something. When interest rates top rising, the stock markets will be more attractive. MM ETFs not a bad place to be temporarily.
@Michel- Thanks for sharing your experience.
Stop rising…lol
We were fortunate to be offered 3% on a CAD savings account at Tangerine until Nov 2022. Also moved US dollars into a Tangerine US account at 1.6 %.
@Scott- Fantastic! 1.6% for USD is a great rate.