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Top 10 Best Money Market ETFs For Canadians in 2024

money market etfs canada

Money Market Exchange Traded Funds (ETFs) are investment funds that primarily invest in short term debt securities such as commercial paper, term deposits, and short term government bonds. These ETFs typically have maturities of less than one year and are considered to be a safe, low risk investment option for investors looking to preserve their capital while earning a minimal return.

Investors can use these ETFs to temporarily park their cash during times of market uncertainty, as they tend to be highly liquid and easily sellable once market conditions stabilize. However, it is important to note that money market ETFs historically offer lower returns compared to other investment options such as stocks or equity ETFs. As such, they are not considered an optimal long-term investment option for investors seeking higher returns and willing to take on more risk.

A Generational Shift in Interest Rates

Interest rates have seen a generational shift in recent times, with central banks in Canada and the United States raising rates to levels that have not been seen in decades. This shift has been triggered by high inflation rates that have been prevalent since the second half of 2021. As a result, the return on money market ETFs has increased significantly, with many offering yields in the range of 4.0% to 5.0%, well above the historical average.

Investors are finding these returns very attractive, especially in light of the little risk that comes with money market funds. Many investors are content to settle for this lower return, particularly after a year when stocks generally saw a sharp decline and the risk of a recession remains very prevalent. This leaves some investors thinking that there is no hurry to rush back into the stock market when they can make decent returns from a money market ETF, without the volatility that comes with equities.

The table below shows some of the top Canadian money market ETFs and their trailing 12-month yield as of October 2023:

Money Market ETFTrailing 12-Month Yield
BMO Investorline Self-Directed4.2%
Purpose High Interest Savings ETF4.7%
CI High Interest Savings ETF4.5%
Evolve High Interest Savings Account5.0%
BMO Money Market Fund ETF4.1%

Investors looking for a conservative investment option with minimal risk may find money market ETFs to be a good option to consider within their portfolio. The rising popularity of these ETFs is a testament to the generational shift in interest rates and the attractive returns they offer.

The Rising Popularity of Money Market ETFs

Money market ETFs have become increasingly popular in Canada due to the current interest rate environment. In 2022, Canadians invested $9.0 billion into these products, and this amount is expected to grow substantially by the end of 2023, given the persistently high interest rates. As a result, more providers of ETFs are launching their own money market products to meet the growing demand. The popularity of money market ETFs is driven by their ability to provide capital preservation and some appreciation while exposing investors to minimal risk.

How to Buy Money Market ETFs in Canada

BMO Investorline Self-Directed

Investors who are looking to invest in Money Market ETFs in Canada can do so through BMO Investorline Self-Directed. BMO Investorline Self-Directed offers a wide range of investment accounts, including TFSA, RRSP, RESP, and more. Investors can unlock access to some of Canada’s most popular ETFs without commission fees. Additionally, investors can take advantage of industry-leading research and real-time quotes to make informed investment decisions.

To buy Money Market ETFs through BMO Investorline Self-Directed, investors must first open an account and make a deposit. Once the account is funded, investors can search for the specific ETF they are interested in and place a buy order. BMO Investorline Self-Directed offers easy-to-use analysis tools to benchmark, customize, and track performance.

Investors should keep in mind that while BMO Investorline Self-Directed does not charge commission fees for buying ETFs, there may be other fees associated with holding an investment account. Investors should review the fee schedule carefully before opening an account.

Overall, BMO Investorline Self-Directed is a great option for investors looking to buy Money Market ETFs in Canada. With a wide range of investment accounts and access to popular ETFs without commission fees, investors can make informed investment decisions and grow their portfolios.

The Alternatives to Money Market Funds

Investors who are looking for safe products that will protect their capital and provide a stable return can also turn to guaranteed investment certificates (GICs) or high-interest savings accounts. These products are also seeing more inflows from investors because of the higher interest rate environment.

GICs are a low-risk investment option that offer a guaranteed rate of return for a specific term. However, investors must typically lock away their funds for a period of one year or longer to benefit from a higher rate with a GIC. On the other hand, high-interest savings accounts (HISAs) offer a higher interest rate than traditional savings accounts and are a low-risk investment option. HISAs are also very liquid and can be easily accessed by the investor.

Compared to GICs and HISAs, money market ETFs offer higher returns for some of their products that invest in slightly riskier products. However, money market ETFs charge their investors a management fee, which reduces the overall return for the investor. Although the fees on an ETF are typically lower than with a mutual fund, they are still charged to the investor.

Furthermore, unlike a GIC or savings account, money market ETFs are not guaranteed. The Canadian Deposit Insurance Corporation (CDIC) typically protects investors up to an amount of $100,000 for accounts payable in Canada and have a term of no more than five years.

Overall, investors should consider their investment goals and risk tolerance when choosing between money market ETFs, GICs, and HISAs. While money market ETFs offer higher returns, they also come with management fees and are not guaranteed. On the other hand, GICs and HISAs offer a lower return but are low-risk and offer guaranteed returns.

Purpose High Interest Savings ETF

The Purpose High Interest Savings ETF (PSA) is a Canadian exchange-traded fund that invests in high-interest savings accounts offered by Canadian banks. The ETF seeks to provide investors with a low-risk investment option with a higher yield than traditional savings accounts.

The PSA ETF is managed by Purpose Investments, a Canadian asset management company. The ETF has a management expense ratio (MER) of 0.10%, making it one of the most cost-effective options for investors.

The PSA ETF invests primarily in high-interest savings accounts offered by Canadian banks, such as Tangerine, EQ Bank, and Alterna Bank. The ETF is designed to provide investors with a diversified portfolio of savings accounts to reduce the risk of any one bank’s failure.

The PSA ETF is a popular option for investors looking for a low-risk investment option with a higher yield than traditional savings accounts. The ETF is suitable for investors who want to earn a higher return on their cash holdings while minimizing their risk exposure.

CI High Interest Savings ETF

The CI High Interest Savings ETF (CSAV.TO) is a passive exchange-traded fund (ETF) managed by CI Global Asset Management. It was launched on June 14, 2019, and has since grown to have assets under management of $8.72 billion as of December 31, 2022. The ETF has a low risk rating and a management expense ratio (MER) of 0.16%, making it an attractive option for investors seeking low-risk investments with higher returns than traditional savings accounts.

Some key features of the CI High Interest Savings ETF include:

  • Ticker: CSAV.TO
  • Units outstanding: 173,850,000
  • CUSIP: 12558L104
  • Total net assets: $8.72 billion (as of December 31, 2022)
  • Management fee: 0.14%
  • Risk rating: Low
  • Distributions: Monthly
  • Yield: 4.72%

The CI High Interest Savings ETF is a popular choice among Canadian investors seeking to earn higher returns on their cash holdings while minimizing risk. It invests primarily in high-quality, short-term debt securities and cash equivalents, providing investors with exposure to the money market.

Overall, the CI High Interest Savings ETF is a reliable option for investors seeking low-risk, high-yield investments in the Canadian money market.

Evolve High Interest Savings Account

The Evolve High Interest Savings Account (HISA) is an innovative investment product offered by Evolve ETFs, one of Canada’s fastest-growing ETF providers. The HISA fund is designed to provide investors with a cash alternative investment that maximizes monthly income while preserving capital and liquidity.

The HISA fund invests in high-interest deposit accounts with four of Canada’s big six banks, providing investors with a yield that is gross of MER. The rates on these accounts may change at any time, but the HISA fund aims to provide investors with a competitive yield that is higher than traditional savings accounts.

The HISA fund is a great option for investors who are looking for a low-risk investment that provides a stable source of income. The fund preserves capital and liquidity by investing in high-quality money market instruments issued by Canadian governments and corporations.

Investors who are looking for a US-based high-interest savings account fund can also consider the Evolve US High Interest Savings Account Fund, which provides exposure to US-based money market instruments.

Overall, the Evolve HISA fund is a great option for investors who are looking for a cash alternative investment that provides a competitive yield while preserving capital and liquidity.

BMO Money Market Fund ETF

The BMO Money Market Fund ETF is a Canadian exchange-traded fund that provides exposure to high-quality money market instruments issued by governments and corporations in Canada. This ETF is managed and administered by BMO Asset Management Inc., a separate legal entity from Bank of Montreal.

As of April 2023, the BMO Money Market Fund ETF Series (ZMMK) is the largest Canadian money market ETF with assets under management of just over $525 million. The fund seeks to provide investors with a low-risk investment option that offers liquidity and stability.

The BMO Money Market Fund ETF invests in a diversified portfolio of money market securities, including treasury bills, bankers’ acceptances, and commercial paper. These securities are issued by Canadian governments and corporations with high credit ratings.

Investors in the BMO Money Market Fund ETF can benefit from the fund’s low management fees, which are among the lowest in the Canadian ETF market. The fund’s management expense ratio (MER) is 0.15%, making it an attractive option for investors looking to minimize their investment costs.

Overall, the BMO Money Market Fund ETF is a solid option for investors seeking a low-risk investment with a stable return. Its low management fees and diversified portfolio of high-quality money market securities make it an attractive option for investors looking for a low-cost, low-risk investment option.

Horizons High Interest Savings ETF

The Horizons High Interest Savings ETF is a popular exchange-traded fund (ETF) managed by Horizons ETFs Management (Canada) Inc. This ETF provides investors with a way to earn interest on their cash holdings while still enjoying the liquidity and convenience of an ETF.

Some key features of the Horizons High Interest Savings ETF include:

  • Low risk: The ETF invests primarily in high-quality, short-term debt securities, which helps to minimize the risk of loss.
  • High yield: The ETF’s focus on high-quality debt securities also allows it to offer a competitive yield compared to other cash-equivalent investments.
  • Tax-efficient: The ETF uses a corporate class structure, which can help to minimize taxes for investors.

Investors who are looking for a low-risk, high-yield cash-equivalent investment may find the Horizons High Interest Savings ETF to be a good option. However, it’s important to keep in mind that like all investments, this ETF comes with some risk, and investors should carefully consider their own financial situation and investment goals before making any decisions.

Horizons Cash Maximizer ETF

The Horizons Cash Maximizer ETF is a Canadian exchange-traded fund that invests in high-quality, short-term debt securities. The fund is designed to provide investors with a low-risk investment option that offers higher yields than traditional savings accounts.

The ETF has recently suspended new subscriptions after reaching approximately $2 billion in assets. The management of the ETF has stated that the suspension is temporary and that they are working to re-open the fund to new investors as soon as possible.

Here are some key facts about the Horizons Cash Maximizer ETF:

  • Ticker: HSAV
  • Launch Date: February 6, 2020
  • Management Fee: 0.18%
  • Investment Manager: Horizons ETFs Management (Canada) Inc.
  • Currency Hedge: No
  • Eligibility: All registered and non-registered investment accounts

Investors looking for a low-risk investment option with higher yields than traditional savings accounts may find the Horizons Cash Maximizer ETF to be a suitable option. However, it is important to note that all investments carry risk, and investors should carefully consider their investment objectives and risk tolerance before investing in any ETF.

Ninepoint High Interest Savings Fund

Ninepoint High Interest Savings Fund is a money market ETF that invests in high-interest savings accounts at Schedule 1 Canadian Banks with a current interest rate of 5.39%, and/or high-quality money market securities. The interest rate on the underlying investments of the fund is effective as of July 13, 2023, and is subject to change.

The fund aims to provide a better alternative for cash balances by offering a competitive interest rate while maintaining a low-risk profile. As of October 2023, the fund has a management fee of 0.16%.

Investors looking for a low-risk investment option with a competitive interest rate may consider Ninepoint High Interest Savings Fund. However, it is important to note that the interest rate is subject to change and past performance is not indicative of future results.

Horizons USD Cash Maximizer ETF

The Horizons USD Cash Maximizer ETF is a money market ETF that invests in short-term, investment-grade debt securities denominated in US dollars. The fund aims to provide investors with a high level of current income while preserving capital and maintaining liquidity.

As of October 23, 2023, the ETF had approximately US$775 million in assets under management. The ETF has suspended new subscriptions due to its asset size. The ETF is managed by Horizons ETFs Management (Canada) Inc.

The ETF seeks to provide a return that is consistent with the performance of the Solactive USD Cash Maximizer Index. The fund aims to achieve this by investing in a diversified portfolio of short-term, investment-grade debt securities, such as commercial paper, certificates of deposit, and US Treasury bills.

The ETF is suitable for investors who are seeking a low-risk investment option with a high level of liquidity. The ETF provides investors with daily liquidity, which means that investors can buy and sell shares on any business day.

Investors should note that the ETF is not a guaranteed investment and that the value of the ETF’s shares may fluctuate. Investors should also note that the ETF’s returns may be affected by changes in interest rates, credit risk, and other factors.

Overall, the Horizons USD Cash Maximizer ETF is a suitable option for investors who are seeking a low-risk investment option with a high level of liquidity and a focus on preserving capital.

Purpose US Cash Fund

The Purpose US Cash Fund is an investment fund managed by Purpose Investments. The fund enables investors to earn attractive yields on their US cash holdings. The fund offers a premium US dollar interest rate that is calculated daily and paid monthly. The fund has low minimum balances and no lock-up periods, allowing investors to access their funds at any time. The deposits are securely invested in cash accounts with Schedule 1 Canadian banks.

The Purpose US Cash Fund is eligible for a dividend reinvestment plan (DRIP) and pre-authorized cash contribution (PACC). The fund is designed to provide capital preservation and some appreciation while exposing investors to minimal risk. The fund is managed by experienced portfolio managers who actively work to ensure the fund can deliver against its primary objectives of providing principal stability and attractive yields.

Investors can benefit from the daily liquidity of the Purpose US Cash Fund, which allows them to access their funds with ease. The fund is a suitable investment option for investors who seek to earn attractive yields on their US cash holdings while minimizing risk. The Purpose US Cash Fund is a great option for investors who want to invest in a cash ETF that offers daily liquidity, low minimum balances, and attractive yields.

Money Market ETFs: A Longer Term View

Money market ETFs have become a popular choice for investors looking for a temporary place to park their cash. However, as long as interest rates remain elevated, many investors are using these funds for longer-term investment strategies. It is important to note that central banks’ ultimate goal is to control inflation and bring it closer to their long-term targets. Once this happens, interest rates will begin to decline, and the returns on money market products will revert to their historical levels.

Investors should keep this in mind when considering money market ETFs as a long-term investment option. While they may offer higher returns than other funds currently, this is not likely to be sustained over the long term. It is important to have a diversified portfolio that includes a mix of different asset classes to mitigate risk and achieve long-term financial goals.

Overall, money market ETFs can be a useful tool for investors looking to park their cash temporarily or as part of a diversified portfolio. However, investors should be aware of the potential risks and limitations associated with these funds and consider their long-term investment goals before investing.

FAQs About Money Market ETFs in Canada

Money Market Exchange Traded Funds (ETFs) are a great way for Canadians to invest in short-term debt securities. Here are some frequently asked questions about Money Market ETFs in Canada:

What is a money market ETF?

A money market ETF is a type of Exchange-Traded Fund that is invested in cash and cash-equivalent securities, as well as short-term debts such as U.S. Treasury bills. These ETFs are designed to provide capital preservation and some appreciation while exposing investors to minimal risk.

How to buy a money market ETF in Canada?

Most major brokerage firms in Canada offer money market ETFs. However, some of the major Canadian banks will not allow you to purchase these ETFs through their brokerages.

Are money market funds safe?

Yes, money market ETFs are generally very safe investments. They are especially designed to preserve capital. As such, historically, the returns on money market ETFs have been minimal.

Is a money market fund a good investment?

This largely depends on an investor’s objective and risk profile. For investors that are not willing or able to take on more risk, money market ETFs may be a suitable alternative to long-term bonds, stocks, and other investments that are more volatile.

Are money market funds guaranteed in Canada?

Money market ETFs are not guaranteed. This is one of the significant differences between a money market ETF and high interest savings accounts. Canadian bank accounts are generally guaranteed up to $100,000 for any institution that is backed by the Canada Deposit Insurance Corporation (CDIC).

Are money market funds liquid?

Yes, money market ETFs are generally very liquid.

Are money market funds safe during a recession?

Yes, money market ETFs are safe during a recession. Especially compared to riskier assets such as equities, as stocks tend to decline during a recession.

Can you lose money in a money market fund?

Yes, you can lose money in a money market ETF.

What is the average return of money market funds?

Historically, the returns on money market ETFs have been minimal, that is, below 2.5%. However, due to the rise in interest rates over the last 18 months, the yields on many market ETFs are now in the range of 4.0% to 5.0%.

Investors should consider their investment objectives, risks, charges, and expenses carefully before investing. The prospectus contains this and other information about the investment company. Please read the prospectus carefully before investing.

Frequently Asked Questions

What are some cash ETFs available in Canada?

There are several cash ETFs available in Canada. Some of the most popular ones include:

  • BMO Ultra Short-Term Bond ETF
  • Purpose High Interest Savings ETF
  • CI First Asset High Interest Savings ETF
  • Horizons Cash Maximizer ETF
  • iShares Premium Money Market ETF

How do money market ETF yields compare in Canada?

Money market ETF yields in Canada tend to be relatively low, as they are designed to provide capital preservation and some appreciation while exposing investors to minimal risk. However, yields can vary depending on the specific ETF and market conditions.

What is the best Canadian money market ETF?

The best Canadian money market ETF will depend on the individual investor’s goals, risk tolerance, and investment strategy. Some popular options include:

  • BMO Ultra Short-Term Bond ETF
  • Purpose High Interest Savings ETF
  • CI First Asset High Interest Savings ETF
  • Horizons Cash Maximizer ETF
  • iShares Premium Money Market ETF

Can you explain the safety of money market ETFs?

Money market ETFs are generally considered safe investments due to their low risk and high liquidity. They are invested in cash and cash-equivalent securities, as well as short-term debts such as U.S. Treasury bills. However, like all investments, there is still some risk involved, and investors should carefully consider their goals and risk tolerance before investing.

Are there any high-yield money market ETFs available in Canada?

There are some high-yield money market ETFs available in Canada, although they may come with higher risk. Some options include:

  • Evolve High Interest Savings Account Fund
  • Horizons High Interest Savings ETF
  • CI High Interest Savings ETF

How do Canadian money market fund yields compare?

Canadian money market fund yields tend to be relatively low, as they are also designed to provide capital preservation and some appreciation while exposing investors to minimal risk. However, yields can vary depending on the specific fund and market conditions.

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