Ready to unlock the full potential of your savings and investments? Looking to level up your financial game? You should check out cash ETFs in Canada! 

You have probably come across the term exchange-traded funds, or ETFs for short, at some point. They are not just some passing trend. They are a popular investment option here in Canada and for good reason. The cash ETFs in Canada come with tons of benefits that can boost your confidence in your investments. First off, ETFs are known for their low costs compared to mutual funds — but it doesn’t stop there. Get ready as we’re about to uncover more exciting details and benefits of these cash ETFs in Canada. Let’s get started!

What is a Cash ETF in Canada?

Before we explore the world of cash ETFs in Canada, let’s take a step back and get a clear understanding of what cash ETFs are. 

What is an Exchange-Traded Fund (ETF)?

Exchange-traded funds are investment options that allow people to pool their money together. This money is then invested in bonds, stocks, or other assets. In return, investors receive shares in the fund. Unlike mutual funds, ETFs can be bought and sold throughout the day on the stock exchange at market prices.

Before investing in an ETF, it is important to read its prospectus. This gives detailed information about the ETF’s goals, strategies, costs, risks, and historical performance.

Related Reading: Bond ETF vs Stock ETF: Which is better?

What is a Cash ETF?

A cash ETF is a special type of ETF investment that focuses on keeping your money in cash, cash equivalents, and other highly liquid assets. Instead of buying stocks or bonds, it invests in things that are similar to cash, but still yields a return. These investments include:

• Treasury bills
• Certificates of deposit
• Commercial paper
• Federal funds
• Guaranteed investment certificates
• Bills of exchange and 
• Short-term mortgage-backed securities and asset-backed securities

The goal of a cash ETF is to give investors a stable place to put their money. While at the same time, investors earn a return that’s similar to what you would get from a regular savings account or a money market fund. 

It is a good option if you want to keep your money safe and easily accessible in the short term. Or, if you’re looking for a temporary place to keep your cash while you figure out your long-term investment plans.

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Are cash ETFs a good investment?

Cash ETFs can be a good investment idea depending on your financial goals and circumstances. But generally, when it comes to saving and investing your money, the cash ETFs in Canada have some advantages over regular savings accounts. Let’s x-ray these benefits!

Potential Returns

First, these ETFs can offer a higher return on your investment (ROI) compared to a high-interest savings account or other similar financial product. In other words, you have the potential to earn more money with a cash ETF in Canada compared to a traditional savings account. If your primary goal is capital preservation rather than seeking higher returns, cash ETFs can also be a suitable choice.

Interest Rates

Another benefit is that when interest rates go up, cash ETF investors tend to see the impact faster than those with regular bank accounts or other types of investments. This means you can take advantage of increased interest rates. However, during periods of low interest rates, the returns may be relatively lower.

Stability and Liquidity

Cash ETFs in Canada typically invest in cash equivalents. They include treasury bills, money market funds, and marketable securities. They offer stability and preserve the value of an investment. In addition, cash ETFs are designed to possess low risk and offer easy access to your funds. This makes them suitable for short-term needs or as a temporary parking place for cash. It is good to have some liquidity in your investment portfolio to ensure you can access money if you ever need it.

Diversification

Cash ETFs can be part of a diversified investment portfolio to reduce risk. By including different asset classes, you can potentially balance the risk and enhance your overall investment strategy.

Related Reading: What is Diversification Strategy in Personal Finance?

Best Cash ETFs in Canada

Before we look at the top Cash ETFs in Canada, there are 3 sub-types of this ETF to consider. They are Cash ETFs, Money Market ETFs, and high-interest savings account (HISA) ETFs. These ETFs fall within the category of cash-like investment options. They allow investors access to cash-like assets that are stable and easily traded. 

However, Cash ETFs in Canada are a bigger group that includes Money Market ETFs and HISA ETFs. Although Canadians have a limited selection of Cash and HISA ETFs, here are the best options to choose from:

Ticker	Assets Under Management (AUM)	Management Expense Ratio (MER)	Yield
JPST	$22.39B	0.18%	4.61%
HSAV	$2.19B	0.18%	0%
BIL	$37B	0.14%	4.35%
CMR	$657M	0.14%	4.88%
ZMMK	$1.1B	0.14%	4.93%
SHV	$20B	0.15%	4.37%

1. JPMorgan Ultra-Short Income ETF (JPST)

JP Morgan offers an investment product that is actively managed. This particular cash ETF in Canada invests in short-term fixed-income securities. They are financial instruments that mature in less than one year.

To ensure effective management, JPST is overseen by a team of four portfolio managers who make decisions on behalf of the investors. JPST has a significant amount of assets under management, indicating that many investors have chosen to invest in this fund. 

It also has a moderate-length track record in terms of its historical performance. Considering all these factors, JPST is a strong contender within the money market space. Specifically for those looking for actively managed short-term fixed-income investments.

2. Horizons Cash Maximizer ETF (HSAV)

The Horizon Cash Maximizer ETF focuses on investing in high-interest deposit accounts, similar to CASH and HISA. But, unlike the other two, it does not distribute taxable income to investors. Instead, any net interest income earned is reinvested and reflected in the fund’s overall value daily.

HSAV temporarily stopped accepting new subscriptions on February 3, 2022. This happened when its net asset value reached $2 billion. Furthermore, in addition to CASH and HISA, Horizons also provides another option called the Horizon USD Cash Maximizer ETF (HSUV.U).

3. SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL)

The SPDR Bloomberg Barclays 1-3 Month T-Bill ETF aims to follow the performance of the Bloomberg 1-3 Month U.S. Treasury Bill Index. It trades on the NYSE Arca Exchange.

This cash ETF invests in short-term U.S. Treasury securities that have maturities of one to three months. These are very safe investments with low risks. And also, it focuses on earning stable returns. The ETF is adjusted at the end of each month to stay in line with its investment goal.

It is important to know that the BIL doesn’t generate high earnings. However, during volatile market times, this ETF could be a reasonable choice to capitalize on interest rate changes and other market fluctuations. Just remember that even short-term investments have risks, especially when interest rates are changing.

Related Reading: Tax Efficient ETFs in Canada

4. iShares Premium Money Market ETF (CMR)

One noteworthy option is the iShares Premium Money Market ETF (CMR.TO). It has been around since 2008 and has gathered over $600 million in assets under management.

CMR.TO offers several reasons to consider it for investment. First, it invests in safe and reliable short-term debt securities. This means your money is put into secure financial assets that don’t have long maturities, thereby reducing the risk.

Second, CMR is a good choice if you need quick access to your money and want to earn some income at the same time. It is designed to provide stability and liquidity, making it helpful for meeting your current financial needs.

In summary, CMR is a straightforward and reliable option for investing. It keeps your money safe, easily accessible, and potentially generates some income.

5. BMO Money Market Fund ETF Series (ZMMK)

BMO is another option for a cash ETF in Canada. This ETF is actively managed and focuses more on commercial paper rather than short-term government debt. While it has a limited performance history, it has accumulated a significant amount of assets under management. In addition, it’s managed by one of Canada’s trustworthy, best banks.

However, it offers a relatively low distribution yield to investors every month. For Canadians looking to invest in a cash ETF in Canada with Canadian Dollars, ZMMK is an alternative to CMR.

6. iShares Short Treasury Bond ETF (SHV)

Since its establishment in 2007, this fund has become one of the largest and most successful cash ETFs in Canada. SHV follows a passive management approach. This means it tracks an index instead of trying to outperform it. This strategy aims for consistent returns with less volatility. Which makes it a relatively low-risk investment.

Overall, if you want a dependable and effective way to invest or save your money in Canadian dollars, SHV is an excellent choice to consider.

Related Reading: Asset Rich and Cash Poor: What Does it Mean?

Finding the Perfect ETF Addition to Your Portfolio

There are different types of cash ETFs available in Canada and it is important to choose the right one for your investment needs. To make this investment decision, you should consider three factors: 

• Risk tolerance
• Time horizon
• Financial goals and objectives

Your risk tolerance describes how comfortable you are with taking risks in your investments. Some cash ETFs may be more conservative and have lower risk. But others may have a slightly higher risk for potentially higher returns. Your time horizon explains how long you plan to hold your investment before needing the money. If you have a short-term goal, you may want to consider a cash ETF in Canada that focuses on stability and liquidity. For longer-term financial goals, you might consider a cash ETF that has the potential for higher returns over time. But in all, investing in a cash ETF in Canada is a worthwhile endeavor.

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