OTTAWA (GlobeinvestorGOLD) - You’re supposed to be shrewdly snapping up bargains when the stock markets gets pounded, but maybe you just need a quiet place to keep some money while you collect your thoughts. Shop carefully because the returns on safe-money investments vary widely.
Whether it’s money market funds, guaranteed investment certificates or high-interest savings accounts, the rate gap between financial institutions can be as substantial as a percentage point or more. Returns for this class of investment are small to begin with, so it’s well worth fighting for a little extra yield.
A great tool for comparing rates on GICs and high-rate accounts is the website of financial data provider Cannex Financial Exchanges (cannex.com). If you checked out the free data on term deposits during the second week of September, you’d have found that posted rates for one-year terms ranged from 2 per cent to as high as 3.2 to 3.85 per cent. These numbers make a useful gauge for assessing the rates you’re able t from your investment dealer, the bank or a deposit broker.
If you use an online broker, be sure to enquire if it offers GICs from a variety of outside providers. At RBC Direct Investing, for example, you’d find a rate of 3.85 per cent was available from ICICI Bank Canada, a subsidiary of an Indian bank that is a member of Canada Deposit Insurance Corp. Want more options? RBC also featured institutions such as AGF Trust, Canadian Tire Bank, Canadian Western Bank, Citizens Bank of Canada and Home Trust, each offering rates of 3.5 per cent or more.
If you’re looking at treasury bills or short-term bonds as a respite from the stock markets, don’t buy without first checking rates on comparable GICs. Competition among banks, credit unions and trust companies is intense and it often results in tip-top rates.
Money market fund returns are tied directly to their management expense ratios, so it’s a general rule than a low-MER fund is a good one. A quick example: Saxon Money Market has a nice, low M f 0.53 per cent and a current yield of 2.51 per cent; CIBC Money Market has an MER of 1.16 per cent and a current yield of 2.17 per cent.
Another consideration if you use safe-money investments is how quickly you can bail out to deploy your money elsewhere. Cashable GICs are widely available, but rates are lower than for conventional GICs. Money market funds don’t usually charge short-term trading commissions – they apply if you buy and then sell within three months or so – but check before buying. A money market fund alternative called the Altamira High-Interest CashPerformer (it trades like mutual fund)is commonly available from investment dealers, but some charge a redemption fee.
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