High Interest ETFs: Alternatives for Canadian Investors

high interest ETF

What are the best high interest ETFs for Canadian investors? Historically, Canadian investors have turned to High Interest Savings Accounts (HISA) offered by banks and brokerages, which are usually bought and sold in the same vein as mutual funds. These HISA products not only make investment seamless but also come with CDIC insurance, a safety net offered by Canadian banks.

Introducing High-Interest ETFs

However, there’s a fresh player in town: High Interest ETFs. These relatively new instruments tend to offer better rates than the conventional HISAs. They essentially aggregate HISA deposits from various Canadian banks and represent them as ETF units, which are then listed on recognized stock exchanges like TSX and NEO. So, instead of treating a HISA purchase like you would with a mutual fund, High Interest ETFs operate much like stocks, bringing along their unique set of advantages and drawbacks, which we’ll delve into in this post.

Here’s a snapshot of four High Interest ETFs:

Yield %Market Cap $Symbols
Purpose High Interest Savings Fund5.30%$5.30 BillionPSA (ETF), PFC8500 (A)
Evolve HISA Fund5.30%$4.90 BillionHISA (ETF), EVF200 (A)
Horizons Cash Maximizer ETF5.30%$2.10 BillionHSAV (ETF)
CI High Interest Savings ETF5.30%$8.23 BillionCSAV (ETF)
September 10, 2023

The Appeal: Competitive Rates and Lower Fees

At the heart of their appeal is the fact that these ETFs, by offering slightly reduced fees, provide more competitive rates when compared to standard HISAs. However, this added benefit comes at a cost – these ETFs aren’t covered under the CDIC protection, and investors may encounter trading commissions.

Navigating Brokerage Restrictions with High Interest ETFs

Moreover, while some brokerages limit access to rival HISAs, High Interest ETFs offer a workaround, enabling investors to chase the best yields irrespective of these restrictions. But as with any investment, they come with their own set of intricacies, especially around their pricing mechanism related to interest accruals.

Weighing the Pros and Cons: Is it the Right Investment for You?

So, are High Interest ETFs the right fit for you? It really boils down to your specific needs, the size of your holdings, and potential trading costs. These ETFs may shine if you’re poised for long-term holdings, deal with sizable amounts, or if your brokerage offers limited HISAs without trading commissions. Conversely, regular small-scale trading might diminish your returns due to frequent commissions.

Conclusion: Making Informed Choices in the High Interest Landscape

This post offers an analytical look at High Interest ETFs, shedding light on their workings, benefits, and potential pitfalls. Whether you’re an experienced investor or just starting out, understanding these nuances will prove invaluable as you chart your investment journey.