Despite having such a “financially attractive” name, money market ETFs are not as exciting as you might think. It is made up of primarily short-term loans and fund transfers between financial institutions, and banks.
Like many other elements of our complex economy, the money market is open to investors and can be a great asset-class in a volatile market.
The money market is enormous. If you want exposure to this safe and highly liquid market, start looking for the best money market ETF in Canada.
At the end of the list, I’ll go over whether I think it’s worth it to buy money market ETFs.
Table of Contents
What is the Money Market ETF?
A money market ETF is typically invested in cash, cash equivalents, cash deposits, commercial papers (short-term unsecured debt), and other high quality and safe debt instruments. This essentially boils down to two things:
- Money market assets are highly safe investments and can help preserve capital in a shaky market.
- They don’t often offer very high returns.
While mutual funds is the most common way of gaining exposure to the money market, money market ETFs usually outperform most money market mutual funds in the long run. For other ETFs, you might consider analyzing the underlying assets to gauge the risk profile of the ETF.
But most money market ETFs are invested in excellent financial intuitions. Stability and security are the chief selling point of a money market ETF.
Best Money Market ETF Canada
Considering the list of the five best money market ETFs in Canada might give you a wrong clue that there are several others, but that’s not the case. Only a handful of money market ETFs available in Canada and not all of them can be considered “true” money market ETFs.
1. CI First Asset High Interest Savings ETF
Dividend Yield: 0.89% (12 month trailing)
Net Asset Value: $2.66 billion
Management Fee: 0.14%
With a decent yield and low management fee, the CI First Asset ETF is the most profitable fund on this list. Despite being about one and a half years old, the fund has amassed a sizeable asset-base. The fund is invested in five out of the big-six banks (not invested in Toronto-Dominion), and the security type is the same in all the banks: Cash and temporary.
Less diversification and exposure to only a handful of assets is probably one of the reasons for this ETF’s high yield. The fund is eligible for all registered accounts. Like all money market ETFs, it’s a low-risk investment.
2. Horizons Cash Maximizer ETF
Dividend Yield: 0.75% (Gross Yield)
Net Assets: $1 billion
Management Fee: 0.18% (currently reduced to 0.08%)
This is one of the youngest ETFs on this list. It was created in Feb 2020 and is currently offering the lowest fee compared to other money market ETFs on this list. Though it might only be temporary, and it can go back to charging 0.18%, which will make it the second most expensive.
The stock is 100% invested in cash deposits. It’s rated low on the risk scale, which is typical for the asset class, and like most others, this ETF’s price has also been eerily stable since its inception. You can choose to get the dividends in cash or reinvest them back in the fund.
3. High Interest Savings Account Fund (By Evolve ETFs)
Ticker: HISA (NEO)
Dividend Yield: 0.75% (Target Yield)
Assets Under Management: $713 million
Management Fee: 0.15%
HISA is a bit different from other ETFs on this list because it doesn’t trade on the Toronto Stock Exchange. It trades on the NEO Exchange, a relatively new stock exchange that aims to offer companies a better listing experience. The ETF is trading on HISA since Nov 2019. Its yield is similar to Horizon ETF, but since the fee is currently higher, you’d get more out from your Horizon investment.
4. Purpose High Interest Savings ETF
Dividend Yield: 0.62%
Assets Under Management: $2.4 billion
Management Fee: 0.15%
Purpose High-Interest Savings ETF offers a modest yield and charges the typical fee, yet it’s one of the most actively traded money market ETFs on this list. Its average daily volume exceeds half a million units. The stock is invested in just four entities: BMO cash account (10.6%), National cash account (40%), CIBC cash account (20.8%), and Scotia cash account (28.6%). It’s the second oldest ETF on this list and started in Oct 2013. The worst its return got was 16% in September 2020.
5. iShares Premium Money Market ETF
Dividend Yield: 0.47% (12 month trailing)
Total Value: $292 million
Management Fee: 0.25%
Despite being managed by the largest fund manager in the world, this ETF is doomed to the last place because of its meager profitability. It costs the most and offers the least yield. One reason behind this low yield can be the over-diversification of the ETF. It’s invested in about 72% of entities.
It’s also the oldest ETF and has been available since Feb 2008. It might be safer and even more stable than other ETFs on this list, but the low yield and high fees don’t make it a very desirable investment.
Are Money Market ETFs a Good Investment?
No. Their only major pro is safety and liquidity, and that doesn’t outweigh the cons. Their returns are barely higher than what you might get from your typical savings accounts. In fact, if you browse through credit unions and online banks, you might find better returns.
And as an added bonus, your cash will actually be insured by CDIC or a provincial department. If you want a safe-haven asset to invest in when the market is volatile, gold and gold-related stocks and funds might offer significantly better returns.
How to buy Money Market ETFs in Canada
My two favourite ways to buy money market ETFs in Canada are the following:
- Wealthsimple Trade – Better known as a robo-advisor, Wealthsimple has now released this fantastic trading platform that now comes in both desktop and mobile versions. All Canadian stock and ETF trades are commission-free. Get a $10 signup bonus when you sign up here.
- Questrade – Canada’s leading discount broker, I use Questrade to trade most of my stocks. It has a desktop and mobile trading platform. All Canadian ETF purchases are commission-free, but be aware that selling ETFs will cost a small fee. With this special offer, you can also get $50 of commission-free stock trades here.
We hope you found this list educational. Even if a money market ETF in Canada is not on your wish-list, it’s beneficial to know this asset class exists. In a volatile market, you may want to consider multiple safe-haven assets to park your cash, and money market ETFs might come in handy.