Parking Cash in Your Portfolio

Many investors like to keep at least a small part of their portfolio in cash. They may want to save their ETF distributions for several months before reinvesting them, or they may want to keep some money on hand for short term needs. Either way, it helps to have a safe place where you can stash some cash and earn a wee bit of interest.

GICs and money market funds have long been the usual places to park cash in a registered account. The problem is that GICs are are not liquid: they’re not cashable without forfeiting the interest, and you can’t add to them each month. Money market funds are more flexible, but these days their yields can be neatly rounded off to 0% after fees. Fortunately, there are alternatives, though many investors don’t even know they exist.

An alternative to money market funds

Several Canadian financial institutions offer high-interest invest savings accounts that can be held inside a registered account at a discount brokerage. These products have a FundServ code, which means they can be bought and sold just like mutual funds. These little-known products combine the best features of GICs and money market funds.

First, investment savings accounts have no MER and no commissions to buy or sell. They pay a fixed rate of interest, usually calculated daily and paid monthly. You can add or withdraw money at any time, and transactions usually settle the next business day. Perhaps best of all, investment savings accounts are fully insured by CDIC for up to $100,000.

Here are some options to consider for the cash component of your portfolio:

Before using any of these products, call your discount brokerage to ask about them, quoting the FundServ numbers listed above. Your brokerage won’t offer all of them, and it may not allow you to trade them easily online (you can try to place an order in the mutual funds section). The products all have minimum deposits and your brokerage may charge early redemption fees.

[Note: For an updated list of high-interest savings accounts, as of January 2014, see this post from Canadian Capitalist.]

84 Responses to Parking Cash in Your Portfolio

  1. Freddie October 29, 2011 at 8:36 pm #

    Here’s what I have at TD Waterhouse:

    Symbol Load RRSP Currency Price Change Yield
    Buy Sell RBC INVESTMENT SAVINGS ACCOUNT 10-Jun-2011
    RBF2001 N Y CDN 1.00 0.00 (0.00%) 1.2
    Buy Sell MANULIFE BANK INVESTMENT SAVIN 28-Oct-2011
    MIP510 N Y CDN 1.00 0.00 (0.00%) 1.25
    Buy Sell RENAISSANCE HIGH INTEREST SAVI 28-Oct-2011
    ATL5000 N Y CDN 1.00 0.00 (0.00%) 1.2
    Buy Sell DUNDEE INVESTMENT SAVINGS ACC 27-Oct-2011
    DYN500 N Y CDN 10.00 0.00 (0.00%) 1.2
    Buy Sell ALTAMIRA HIGH-INTEREST CASHPER 28-Oct-2011
    NBC100 N Y CDN 1.00 0.00 (0.00%) 1.2
    Buy Sell MANULIFE TRUST INVESTMENT SAVI 28-Oct-2011
    MIP710 N Y CDN 1.00 0.00 (0.00%) 1.25
    Buy Sell MANULIFE BANK INVESTMENT SAVIN 28-Oct-2011
    MIP511 N Y US 1.00 0.00 (0.00%) 0.2

  2. Cristian November 26, 2011 at 1:00 pm #

    This may sound silly, but I have about half a million in cash in my small-business acount, which I plan to eventually invest for income and growth, but right now the markets are so unpredictable that I would rather wait for a while for things to settle. Any suggestions as to what would be the best way to get some income on that amount of money? I looked at choices like Ally and ING, but the insurance covers only $100,000, the rest would be uninsured…
    Thanks,
    Cristian

  3. Canadian Couch Potato November 26, 2011 at 3:03 pm #

    @Cristian: If you are looking for an investment with a guarantee, I suppose the only option is to spread your money across five financial institutions ($100K at each). This is a nuisance, but it does give you the protection you’re looking for. Any other investment (such as government bonds) carries some risk of price decline.

  4. gsp November 26, 2011 at 5:51 pm #

    Since comments have been made recently and responded to by CCP, here are some updates on this topic.

    IBN 100 from ICICI bank pays 1.4% which AFAIK is the top rate out there for brokerage HISAs. http://www.icicibankfas.ca/popup_hiisa.htm

    TD introoduced 4 new HISAs each coming with its own 100k CDIC protection and paying 1.25%. TDB8150 TDB8155 TDB8157 TDB8159
    http://www.tdam.com/Content/Products/p_LandingPage.asp?PID=27

  5. Pacific November 26, 2011 at 10:34 pm #

    The Credit Unions have unlimited guarantees on their savings products, in BC at least.

  6. Michael November 27, 2011 at 8:39 am #

    @gsp: that is interesting that TD now has an ISA (though offers nothing added since the rate is inline with the many others). But the IBN100 from ICICI sound compelling @ 1.4% – though I am not able to get a quote for this product at TD Waterhouse – does anyone else see this offering at their brokerage?

  7. gsp November 27, 2011 at 3:13 pm #

    Can’t see IBN100 at TDW either, guess they are in no hurry to add it in their online system. It’s been available by phone for at least a month from what I gather. Initially not available in RRSP accounts but that should come if it hasn’t already.

  8. Peet December 4, 2011 at 12:09 am #

    The article gets our attention with “five-year GIC at 12% interest”, but the brochure’s fine print shows 12% as the “fifth year rate”, so it was not paying 12% for the entire term.
    A current example of something similar is TD Canada Trust’s “5-Year Stepper GIC” with rates of 0.95%, 1.15%, 1.50%, 2.25% and 4.05% for years 1 to 5 respectively, and an effective annual yield of 1.974%, which is less than half of the fifth year rate.

  9. Peter December 5, 2011 at 3:09 pm #

    Apparently for IBN100 it is at TDW but you have to speak to a rep. Rate is now 1.3%
    Note that TDW has come out with 3 funds of their own (TDB8150, TDB8155, TDB8159) considered separate for CDIC purposes. They pay 1.25% currently and are available on-line.

  10. Jerome December 6, 2011 at 4:36 pm #

    Say I have 15k waiting and doing nothing in my Questrade account (waiting for opportunities – money market funds useless now and I want the money available quickly if I need to jump on something). Could I just go and buy the RBC one right away? On their webpage they say no fees but they are sneaky sometimes so I thought I would check with you guys first.

    thanks a million,
    J

  11. Canadian Couch Potato December 6, 2011 at 9:30 pm #

    @Jerome: There’s nothing sneaky about these funds. They may have a minimum holding period, and your brokerage may charge you a fee to buy them (I believe Questrade charges for mutual fund purchases) but there are no other fees.

  12. greg December 29, 2011 at 5:31 pm #

    Questrade really, really sucks for the tsx-v. I pulled my rsp account from them a week after I started. I’ve been with credential direct for a while now. I recommend them.

    Am parked in Manulife Trusts’s MIP710 at 1.3%. Just stopped by to see if anyone had a higher rate.

  13. Jerome January 9, 2012 at 12:48 pm #

    I just checked with Questrade and yes they would charge MF purchase commissions, but I can’t find the funds online in the fund lookup tool! Obviously their agents were unhelpful so I was wondering, did any of you guys buy these on Questrade? If so, how did you do it?

  14. Lori January 23, 2012 at 7:31 pm #

    @greg
    I just moved my RRSP over to Questrade and really want to keep my money in Canadian dollars. I tried the HISA with Questrade and they don’t have it. Not really interested in buying mutual funds first their is the buy fee and then the annual MER fee.

    Wondering now about the fees to move from Questrade to Credential Direct…

  15. Adam January 29, 2012 at 12:58 am #

    I just checked Questrade and it definitely has these HISA accounts available.

  16. J January 29, 2012 at 11:53 am #

    good! how can you buy them?

  17. Adam January 31, 2012 at 3:59 pm #

    I just figured this out too.. In myQuestrade, go to the My Mutual Funds -> Order Entry
    Mutual funds are $9.95/trade flat fee in Questrade… but if you have let’s say 10k in a savings account, your interest in 1 month will take care of the $9.95 flat fee and the funds are ready to go when you see an opportunity on a dip.

  18. J January 31, 2012 at 5:14 pm #

    awesome! for some reason they dont appear in the search tool but they do appear there. go figure. which one did you get and for which reason?

  19. Adam February 1, 2012 at 4:05 pm #

    I’ve always wanted to use this site, thanks for giving me an opportunity!
    http://lmgtfy.com/?q=manulife+interest+savings+account

  20. Adam February 1, 2012 at 4:17 pm #

    Sorry for the sarcastic post above, what I meant above is you really just have to research the interest rates yourself. Use google and you’ll find they range from 1.20-1.25% right now. So there is a 1 time fee in Questrade of $9.95, this isn’t bad at all. I think some people are getting scared off because it is listed under “Mutual Funds” and figure there must be a MER buried somewhere in there but HISA’s have no MER. I am new to Questrade but just recently used their online chat help a couple times and they have been very helpful. I’d stick with Questrade and if you ask specific questions, the online chat help is great.

  21. John Lever March 12, 2012 at 1:10 pm #

    Thanks for the tip. This is exactly what I was looking for FYI the RBC Mutual Fund code is RBC2010

  22. dong September 7, 2012 at 8:06 pm #

    i learned today that you CANT buy these funds anymore if you use td waterhouse, you have to use their own money markey mutual funds…

    i was told (by a president account rep, no lrss) that “since td waterhouse now offer similar products, there no reason for our clients to use funds from other companies”. This limitation was put in effect june 2012 it seem.

    i suggest everyone complain to their head office

  23. Canadian Couch Potato September 7, 2012 at 8:14 pm #

    @Dong: Is the TD alternative offering the same interest rate (typically 1.25% today)? If so, then there’s really no issue, since the products are identical. My brokerage is iTrade and they only allow you to use the Dundee fund, which is fine. But if the TD fund is offering a lower rate than the others, then that’s really bad customer service.

  24. Michael September 7, 2012 at 10:08 pm #

    Yes I tried and it seems at TDW you can no longer buy any competing ISA funds. The TD fund is TDB8150 yields 1.25%, which is inline with most of the other ISA brokerage products. But but I typically buy Manulife Trust ISA (MIP710) which currently yields 1.3% and now that is no longer an option. 5 bps is not a deal breaker but disappointing and perhaps worth complaining about. Plus if you need to park more than 100K then this exceeds the limits of CDIC does it not? That is you no longer have the option of parking in multiple ISA funds to retain CDIC.

  25. gsp September 7, 2012 at 11:46 pm #

    RE:CDIC limits, they have 4 different CAD$ funds, each offered by a different entity within the group and each with 100k insurance. http://www.tdam.com/Content/Products/p_LandingPage.asp?PID=27

  26. Michael September 8, 2012 at 8:19 am #

    That is good that TDW has CDIC coverage to the extent of $400k with the 4 products. But still a net negative for the customer especially if the day comes that these ISA products offer varying and higher rates. I would be interested to know how these products work and speculate that if the customer earns 1.25% then their brokerage may earn 0.25% trailer fee, for example. So if the product is strictly in-house at TD then you would think they could offer a superior rate…

  27. Chris November 21, 2012 at 7:52 pm #

    Is there a fee to put money in the HISA from TD? Thanks.

  28. Canadian Couch Potato November 21, 2012 at 7:56 pm #

    @Chris: There should never be a fee to transact fees HISAs, but you should call your brokerage just to make sure.

  29. Fred November 22, 2012 at 9:46 am #

    I have my accounts at TD brokerage and I’ve never been charged any transaction fees / commissions.

  30. calgary64 February 26, 2016 at 5:17 pm #

    hi, how do i report interest income from these high-interest savings account to CRA? same as any other savings account i.e. manually add all interest received in 2015? i dont think i got a T5 for this account from TD Direct Investing. thanks.

  31. Canadian Couch Potato February 26, 2016 at 5:25 pm #

    @calgary: You should receive a T5. It’s still early: should come in March.

  32. Dee April 11, 2016 at 5:04 pm #

    As mentioned above, these ISA products have a FundServ code, which means they can be bought and sold just like mutual funds. Perhaps this is why TD is reporting the sale of high interest savings in the T5008, which is normally reserved for traditional securities like mutual funds and stocks. Does this mean we have to report the redemption of ISAs on the T1 Schedule 3 for capital gains and losses, even when the proceeds and cost of these accounts are the same, so there is no gain or loss? ISAs are supposed to be savings accounts, and we receive a T5 for the interest earned, so why should they be reported on the Schedule 3? Thanks.

  33. Canadian Couch Potato April 11, 2016 at 8:41 pm #

    @Dee: If the brokerage reports a capital gain or loss on an ISA, it’s in an error (though I have seen it!). Only interest income should be reported via a T5.

Trackbacks/Pingbacks

  1. High Interest Savings Accounts at Discount Brokers | MoneySense - October 30, 2012

    […] Update (Nov. 29, 2011): Updated with new high-interest savings offering at TD Waterhouse. Also check out Canadian Couch Potato’s post on parking cash in your portfolio. […]

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