The investment industry has a great menu of options for people with lots of cash sitting in their accounts, but a new one stands out for something you don’t see a lot of in the financial world.
We’re talking here about clarity and clear-cut branding. That’s what you get in the growing selection of cash management exchange-traded funds. Really, these ETFs are nothing more than money market funds, which have been around for ages. What the cash management label does is inform investors that this is a product for holding cash, an asset of some importance right now because interest rates remain high.
TD Asset Management launched the TD Cash Management ETF (TCSH-T) last week. Existing competitors include the Evolve Premium Cash Management Fund (MCAD-T), the Purpose Cash Management Fund (MNY-T) and the BMO USD Cash Management ETF (ZUCM-T).
These funds for now have after-fee yields a bit above 5 per cent, which are generated by holdings in short-term corporate and government borrowings. There is only a tiny level of risk in these securities because they mature in the next 30 to 365 days. Unit prices are generally pegged at $50 or $100, with small increases in the price until the monthly income distribution is made. The price returns to the base level after the distribution, which is a good time to buy.
Money market and T-bill ETFs are quite similar, but the term “money market fund” went stale in the years when interest rates were low and few investors bothered to find parking places for the cash in their accounts.
High interest savings account ETFs are a highly successful product for holding investing cash, but their returns have edged down to a point where they are often below cash management and money market ETFs. HISA ETFs hold their assets in special big bank savings accounts offered to institutional investors as opposed to retail clients.
There’s a version of the HISA ETF that trades like a mutual fund: the investment savings account. ISAs offer deposit insurance, unlike HISA ETFs. But you give something up on yield, which usually comes in around 4.6 per cent.
You want more variety for parking cash? Guardian Capital recently introduced Canadian and U.S. versions of the Guardian Ultra-Short T-bill Fund (GCTB-T and GUTB-U-T, respectively). These funds hold treasury bills maturing in less than six months, a market niche that today offers strong yields.
Variety is great if you want to put some cash in your investment account to work, but simplicity is important, too. That’s why cash management ETFs are a good addition to the product mix as a go-to way to park cash in investment accounts that meet these requirements:
-The amount you’re investing is large enough to make any trading commissions inconsequential – some brokers charge as much as $9.99 to buy or sell stocks and ETFs;
-You have an account at digital brokers Desjardins Online Brokerage, National Bank Direct Brokerage or Wealthsimple, which charge no commissions;
-You use Questrade or CI Direct Trading, which charge nothing to buy ETFs and regular commissions to sell.
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Stocks to ponder
BCE Inc. (BCE-T) The telecom’s underwhelming 2023 results have forced the company’s board to dial back its dividend growth to 3.1 per cent for 2024. But cutting the dividend, not increasing it, would be the responsible thing to do, argues David Milstead. He says BCE simply hasn’t been generating the cash to cover it.
The Rundown
‘Higher for longer’ is back. What happens to stocks if there are no rate cuts this year?
A few months ago, markets were expecting as much as eight Fed cuts this year, bringing its key rate down by two full percentage points. But financial markets now seem to finally be coming to the realization that central banks have zero urgency in easing back on interest rates. With the market’s probabilities for rate cuts falling so quickly, it raises the question, what if there are no rate cuts this year at all? Tim Shufelt reports.
Where to find the best value in REITs
Real estate investment trusts have gone through a difficult and volatile period. Over the past five years ended in December 2023, the Canadian REIT Index returned 4.19 per cent, including distributions, annualized. This compares unfavourably with the S&P/TSX Composite Index five-year return of 11.30 per cent annualized, including dividends. But as fund manager veteran Tom Czitron reports, there are pockets of the REIT market now offering good value.
Wall Street hunts for more AI gold after Nvidia’s soaring rally
Money managers are scrambling to cash in on the stock market’s interest in artificial intelligence, as a stunning rally by Nvidia sparks a search for other companies that are capitalizing on the technology. Meanwhile, billionaire Ray Dalio, founder of hedge fund Bridgewater Associates, says the Magnificent Seven stocks are a “bit frothy but not in a full-on bubble.”
With debt levels exploding, central bankers are in a Catch-22. We’re heading for trouble
Central bankers have some tough options to consider as debt levels surge and inflation remains elevated. For value investing professor Dr. George Athanassakos, nothing they can do will prevent the bursting of a bubble in equities and in consumption and borrowing.
U.S. bond giant PIMCO expects term premiums to rise again
U.S. Treasury term premiums, a measure of the compensation investors demand for holding long-term bonds, could shoot up again amid sticky inflation and rising fiscal deficits, U.S. bond asset manager PIMCO said on Thursday. And that has implications on how investors should be positioned in the bond market.
Why is it so hard to beat index funds?
The importance of randomness in investing has been recognized since at least the 1970s. However, because of a phenomenon known as the paradox of skill, randomness has become increasingly dominant: As the overall skill level increases, the relative importance of skill declines. Biff Matthews of Longview Asset Management explains.
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Ask Globe Investor
Question: If one has made substantial gains on various stocks, is it better to cash in and take some profit or let it ride? I keep reading different answers to this question. Is there a general rule of thumb for this, or what does logic tell us?
Answer: The answer depends on many factors. If the stock has risen to the point that it accounts for a substantial portion of your portfolio – say, 10 per cent or more, just to pick a round number – trimming your position and deploying the cash elsewhere would help to control your risk. If the stock’s price-to-earnings multiple (or other valuation metric) has become excessively stretched, or if you have become less confident about the company’s growth prospects, these would be additional reasons to consider cutting back. You might also want to take into account the capital gains tax implications, if any, of selling. On the other hand, if you still like the company’s prospects, the valuation is reasonable and the stock doesn’t account for an outsized weighting in your portfolio, you may want to hang on. You won’t necessarily get it right every time – you might sell a portion of your position only to watch the share price continue to rise – but controlling your risk is the name of the game here.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
