Best HISA ETFs in Canada in 2024: Investors in Canada have a variety of options when it comes to investment choices. One attractive option is Exchange-Traded Funds (ETFs), which allow investors to buy into diversified portfolios rather than individual stocks. Among the popular types of ETFs are High-Interest Savings Account ETFs (HISA ETFs), which are often classified as fixed-income products due to their regular monthly interest income.
HISA ETFs aim to replicate the performance of diversified portfolios of high-interest savings accounts. Let’s explore how these ETFs work and highlight some of the top choices for 2024.
Top High-Interest Savings Account ETFs for 2024
When considering an investment in ETFs, the first step is to determine the type you wish to pursue, followed by selecting the specific ETF. With numerous options available, making the right choice can be challenging. Here are some of the leading HISA ETFs to consider in 2024, ideal for offsetting riskier investments or starting your investment journey.
- Evolve High-Interest Savings Account Fund
- Overview: Suitable for those seeking liquid short-term investments, this low-risk ETF focuses on high-interest savings accounts and distributes monthly.
- Details: Launched in November 2019, it has a management fee of 0.15% and an annual distribution yield of 4.48%.
- Horizons High-Interest Savings ETF
- Overview: This low-risk ETF is also eligible for registered accounts and has been active since November 1, 2021.
- Details: With a management fee of 0.10%, it boasts a yield of 4.68% and manages net assets totaling approximately $4.6 billion.
- CI High-Interest Savings ETF
- Overview: Launched in 2019, this ETF is favored by investors looking for fixed-income options and generates monthly cash flow.
- Details: It has a management fee of 0.14% and a net yield of 4.75%, managing net assets of around $8.13 billion.
- Horizons Cash Maximizer ETF
- Overview: Focused on generating modest capital through investments in HISAs, this ETF does not currently provide regular distributions.
- Details: With a management fee of 0.18% and a gross yield of 5.10%, it has suspended new subscriptions after surpassing $2 million in assets.
- Purpose High-Interest Savings ETF
- Overview: This ETF offers unique features such as no hidden fees, no lock-up periods, and daily liquidity, while calculating interest daily and paying it out monthly.
- Details: It has a management fee of 0.15% and offers a gross yield of 5.07%.
- iShares Premium Money Market ETF
- Overview: Aiming for liquidity, current income, and capital preservation, this low-risk ETF invests in high-quality short-term securities.
- Details: Established in 2008, it has a management fee of 0.12% and provides monthly income distribution.
Understanding HISA vs. Cash ETFs
It’s essential for investors to recognize the distinctions between High-Interest Savings Accounts and Cash ETFs. While HISAs are deposit accounts that typically offer higher interest rates than traditional savings accounts with easy access to funds, Cash ETFs are investment vehicles that mimic the returns of HISAs.
HISAs are often preferred for their simplicity, competitive rates, and liquidity, although they may not yield as high returns as other investments and often come with fees and minimum balance requirements. Conversely, Cash ETFs can offer higher monthly income but carry market risks and do not guarantee returns due to fluctuations in the market.
Investing with Canadian Banks
Many of Canada’s major banks, such as RBC, TD, and BMO, do not allow the purchase of the aforementioned HISA ETFs. Instead, they offer their own money market funds and high-interest savings products. However, other banks like Scotiabank, CIBC, and National Bank do support the purchase of these ETFs. Opening an account with an online brokerage can also provide lower fees and greater access to various ETFs.
Risks to Consider
One significant risk with ETFs is the lack of deposit protection. While funds in a GIC or HISA are insured by the Canada Deposit Insurance Corporation (CDIC) up to $100,000, HISA ETFs do not carry this guarantee. Although they are generally considered low-risk and can offer solid returns, it’s crucial for investors to be aware that these funds are not protected like traditional deposit accounts.
Top Canadian HISA ETF by Yield
Among the ETFs mentioned, the Horizons Cash Maximizer ETF offers the highest yields, although it lacks the consistent monthly income provided by other HISA ETFs. Horizons also leads in the HISA ETF market with multiple offerings.
GICs vs. HISAs
When comparing investment options, Guaranteed Investment Certificates (GICs) and High-Interest Savings Accounts (HISAs) are noteworthy alternatives. GICs offer a guaranteed return over a fixed term but restrict access to funds without penalties. In contrast, HISAs provide higher interest rates without locking in funds, making them ideal for short-term use.
GICs come in various types, including cashable, non-cashable, fixed-rate, and variable-rate options, while HISAs are suitable for investors needing flexibility within a one- to five-year timeframe.
Best ETF According to Morningstar
For those seeking long-term investments, the Vanguard S&P 500 ETF has earned the Morningstar Gold Medalist rating, focusing on large-cap U.S. stocks and employing efficient index management. However, this fund is more suited for high-risk investors.
Conclusion
Investing in Canada offers diverse options, and your choices should align with your individual financial goals. Whether you prefer short-term investments like GICs and HISAs or are looking at long-term strategies involving ETFs, careful consideration is essential. HISA ETFs can provide a mix of flexibility and returns, but they come with risks that differ from traditional savings accounts. If you’re uncertain about your investment path, consulting a financial advisor can help you navigate your options and create a tailored investment strategy.