This and other short-term purposes are where cash alternative ETFs can come in handy. They are considered safe (though not covered by deposit insurance), yet liquid. Unlike a guaranteed investment certificate (GIC), you can sell them at any time—but they’ll still give you GIC-like returns and will hold their value if interest rates rise.
Our top picks for cash alternative ETFs
Of the dozen or so options in Canada, our panel liked the Global X 0-3 Month T-Bill ETF (CBIL) best. Panellist Mark McGrath called it “the safest Canadian-dollar cash alternative available.” It invests in Canadian federal treasury bills that are less than three months from maturity, so there is no duration risk.
“A low 0.11% MER for a fairly stable net asset value with minimal credit and interest-rate risk, and it pays monthly income that fluctuates in lockstep with the Bank of Canada policy rate,” added Tony Dong.
The panel also favoured the BMO Money Market Fund ETF, which has a little more leeway to invest in short-term government and corporate paper and generates a slightly higher yield as a result. Third place in our voting went to the Global X High Interest Savings ETF, which holds a portfolio of just five high-interest savings accounts with different Canadian financial institutions.
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