As part of a column on keeping cash in your RRIF to fund the payments, Rob Carrick said last Saturday “Mr. Andreana uses a high-yield savings account to hold his clients' three-year cash supply. Offered by National Bank, B2B Trust and Dundee Bank of Canada, these accounts can be held within a RRIF, an RRSP or another type of account. Money market funds, especially supersafe T-bill funds, are also an option for the cash in your RRIF. But while returns for these funds are below 0.6 per cent in many cases right now, high-yield savings accounts pay as much as 1.6 per cent.”
Well, he forgot our own SRI high yield savings account offered by Inhance and backed with CDIC insurance from Citizens Bank. The rates have dropped to 1.4%, but Inhance remains competitive with Dundee and National Bank, all of whom are positioned slightly higher than National Bank (which has rebranded the old Altamira Cash Performer).
On the money market front, a new report by Novethic ‘The Challenges Facing SRI Money Market Funds’ states “The emergence of a money market offer could provide a prime opportunity for the development of SRI. Although SRI is generally associated with long-term investment products, issuers could eventually be pushed into applying sustainable development criteria in order to benefit from easy access to short-term credit, given the considerable sums invested in money market funds - provided they meet ESG criteria. This could also have a domino effect, in turn impacting equity and bond markets and driving issuers into an upward spiral.” Bring it on!
Money Market funds have traditionally been trusted as safe havens for cash. However, the current interest rate environment is challenging, and some funds are moving towards higher risk holdings in order to improve returns. Whether retail investors understand that they are taking on higher risk for these higher returns is unclear. Certainly, it continues to be a time when transparency, as well as cash, is king.
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