High Interest Savings ETFs are another option for investors searching for higher yield on idle brokerage account balances. While similar to Investment Savings Accounts there some important differences between the two investment vehicles.
Let’s take a closer look at High Interest Savings ETFs to see if they are right for you.
High Interest Savings ETFs: Basic Features
What Are They ?
Simply put, they are exchange traded mutual funds whose assets consist of deposits in high interest savings accounts placed with regulated Canadian banks.
Why the Higher Interest ?
The mutual fund managers are able to leverage the size of their deposits to negotiate higher interest rates than regular retail investors.
Since our first article published in August, the mutual fund companies have updated their sites to include current yields (remember to deduct the management fee from the gross yield to arrive at the yield you can expect – pre-trading fees). The ETFs seem to offer yields slightly higher than comparable Investment Savings Accounts (after factoring in mutual fund management fees, but without accounting for trade commissions).
Are the ETFs Insured ?
No. Even though the ETFs invest in deposit accounts, an investment in the ETFs is not insured by deposit insurance. So, in theory you could lose money in a High Interest Savings ETF.
In addition, since ETFs trade on an exchange there may be a difference between the price you pay and the net asset value of the fund, effectively reducing your yield.
Who Offers the ETFs ?
Here are the details of fund families that offer these products:
- Purpose High Interest Savings ETF (ticker: PSA). For more information click here
- Purpose US Cash Fund (ticker: PSU.U). For more information click here
- CI First Asset High Interest Savings ETF (ticker: CSAV). For more information click here
- Evolve High Interest Savings ETF (ticker: HISA). For more information click here
- Global X High Interest Savings ETF (ticker: CASH). For more information click here
- Ninepoint Cash Management Fund ETF Series (ticker: NSAV). For more information click here
High Interest Savings ETFs vs Investment Savings Accounts: A Comparison Chart
| High Interest Savings ETFs | Investment Savings Accounts | |
| Insured | No | Yes* |
| Asset | You are buying a security. | You are making a deposit in a bank account. |
| Settlement/Funds Availability | T + 1 | T + 1 |
| Trading Commission | Same as any exchange traded fund. | Typically no fees if bought from a bank affiliated with your broker. |
* On April 30, 2020 CDIC protection was expanded to include foreign currency deposits – so USD deposits with Canadian CDIC insured institutions are insured within the CDIC limits.
The Thrifty Bottom Line
Think of High Interest Savings ETFs as another tool in the investor tool kit. Before you invest, though, understand the risks and benefits of what you are buying. The yield presented by a High Interest Savings ETF is certainly better than having your idle funds sit uninvested. However, if you plan to regularly buy and sell an ETF the incremental yield when compared to an Investment Savings Account may be eaten up by trading commissions.
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