# Getting a return on Cash held in a TFSA



## bigmoneytalks (Oct 3, 2014)

Hi all,

I'm going liquidate 1 or 2 holdings in my TFSA soon and want to hold on to this cash temporarily. What can I do to keep this cash working for me until I buy? Preferably in my TFSA. Do I buy a money market fund? or would it make sense to move this money out of the TFSA into a high savings account and then move it back into the TFSA when I'm ready to buy? 

Thanks


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## agent99 (Sep 11, 2013)

bigmoneytalks said:


> Hi all,
> 
> I'm going liquidate 1 or 2 holdings in my TFSA soon and want to hold on to this cash temporarily. What can I do to keep this cash working for me until I buy? Preferably in my TFSA. Do I buy a money market fund? or would it make sense to move this money out of the TFSA into a high savings account and then move it back into the TFSA when I'm ready to buy?
> 
> Thanks


Most on-line brokerages have HISAs that can be bought and sold in small amounts. I use BMOIL's AAT770. Initial purchase of $1000 then $50. Current interest 1.35% (For US$ AAT780 is 1.45%) These could increase. These don't bring in much, but better than nothing. Once there is enough accumulated, I might buy something else or perhaps need some cash. No point in moving out of TFSA into a taxable account.


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## james4beach (Nov 15, 2012)

Which brokerage do you use? How long do you anticipate leaving that cash in storage?

Generally your best options will be the HISA as agent99 describes, or if you don't have access to those, you could use PSA (Purpose High Interest Savings) or XFR (iShares floating rate bond fund)


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## Eclectic12 (Oct 20, 2010)

A lot depends on when the money might be used for other investments.

Most don't want to be bothered with moving the money around as it may impact buying opportunities. What usually gives them the best flexibility is to find the HISA that trades as a MF that the brokerage likes. For example. for TDDI this would be one of several where TDB8150 while CIBC IE has ATL5000.
http://www.canadiancapitalist.com/high-interest-savings-accounts-at-discount-brokers/

There are some wrinkles that make them different. For example. TDDI lumps in cash + TDB8150 in a registered account so that one can buy a stock when there isn't enough cash (they will warn you that you will have to sell some of TDB8150). CIBE IE requires the ATL5000 sell order to be made before the stock can be bought (it does not have to settle, just be placed).

Usually there is no holding period and no cost to move money in and out.

TDB8150 has just been bumped up to 1.60% interest, paid as additional units.


Cheers


*PS*
For TDB8150 the initial purchase is minimum initial purchase is $1K but after that, buys of $100 an up go through. This allows dividends and payments of small amounts to be swept into the HISA.


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## bigmoneytalks (Oct 3, 2014)

james4beach said:


> Which brokerage do you use? How long do you anticipate leaving that cash in storage?
> 
> Generally your best options will be the HISA as agent99 describes, or if you don't have access to those, you could use PSA (Purpose High Interest Savings) or XFR (iShares floating rate bond fund)


I use Scotia's iTrade. I plan on keeping the cash around 6 - 12 months.


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## bigmoneytalks (Oct 3, 2014)

Thanks for the replies. Any particular advantage between HSIA vs XFR (bond etf?). Trying to limit any commission fees as well... thinking of switching from itrade to questrade because of this.


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## like_to_retire (Oct 9, 2016)

bigmoneytalks said:


> Thanks for the replies. Any particular advantage between HSIA vs XFR (bond etf?). Trying to limit any commission fees as well... thinking of switching from itrade to questrade because of this.


Apples and oranges. The HISA will preserve your capital, the ETF may not.

Note there's no commission to buy and sell HISA's, as they are classed as a mutual fund.

ltr


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## james4beach (Nov 15, 2012)

bigmoneytalks said:


> I use Scotia's iTrade. I plan on keeping the cash around 6 - 12 months.


Here are the high interest savings instruments at iTrade
https://www.canadianmoneyforum.com/showthread.php/122433-Scotia-ISA-changes-(Hollis-becomes-ADS)

DYN6000 is bought like a mutual fund (no fees) and yields 1.60% for amounts less than 100K and 1.75% above. This is definitely the way to go. It works the same way as TDB8150 as described above, but each brokerage uses their own version and DYN6000 is the Scotia iTrade fund.


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## Koogie (Dec 15, 2014)

If you are willing to move your money, you can get higher rates inside TFSA accounts at other institutions.

https://www.highinterestsavings.ca/chart/

sort the chart by TFSA rates.


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## AltaRed (Jun 8, 2009)

Koogie said:


> If you are willing to move your money, you can get higher rates inside TFSA accounts at other institutions.
> 
> https://www.highinterestsavings.ca/chart/
> 
> sort the chart by TFSA rates.


Not if the money could be used for equity or bond purchases at any moment. Also, without additional contribution room, cannot withdraw from one TFSA and contribute back to same, or another, TFSA in the same calendar year. I think the OP just needs to stay put with what s/he can buy in his/her existing TFSA. The broker ISAs, in this case the DYN ones in Scotia iTrade, are likely the best bet.


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## Koogie (Dec 15, 2014)

AltaRed said:


> Not if the money could be used for equity or bond purchases at any moment.


OP says: "I plan on keeping the cash around 6 - 12 months." That doesn't sound like "at any moment"



AltaRed said:


> Also, without additional contribution room, cannot withdraw from one TFSA and contribute back to same, or another, TFSA in the same calendar year. I think the OP just needs to stay put with what s/he can buy in his/her existing TFSA. The broker ISAs, in this case the DYN ones in Scotia iTrade, are likely the best bet.


Who said to do a withdraw and contribute ? Open a TFSA and have it transferred from one to the other.


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## james4beach (Nov 15, 2012)

In addition to the DYN funds, another option is to buy a 6 month GIC through iTrade at 2.35%. If you're willing to lock in some of your cash for 6 months, splitting your cash between DYN6000 & 6 mo GIC gives you a yield of 1.98%.

(By the way, that's a similar trick to what the PSA fund does -- mixing cash and short term GICs)


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## Eclectic12 (Oct 20, 2010)

Koogie said:


> ... Who said to do a withdraw and contribute ? Open a TFSA and have it transferred from one to the other.


Most people I know do the December transfer strategy because of the partial or full withdrawal fee. 
http://www.canadiancapitalist.com/the-tfsa-december-transfer-strategy/

Maybe the $$ are big enough it won't matter ... in which case, the transfer is an option.

I've had several people report that their transfer was sent into CRA as a withdrawal then re-contribution in the same year, resulting in penalties so that would be something to make sure about.



Cheers


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## AltaRed (Jun 8, 2009)

Koogie said:


> OP says: "I plan on keeping the cash around 6 - 12 months." That doesn't sound like "at any moment"


It could be given the right market conditions, e.g. October. The OP is only guessing (in my opinion) given the potential differences in wording of his/her posts. I might commit to a 30 day cashable GIC but not more if I think there could be October type market opportunities in Jan or Feb... or Apr, or May. 





> Who said to do a withdraw and contribute ? Open a TFSA and have it transferred from one to the other.


The OP mentioned about withdrawal being an option. I am pointing out the constraints in doing so within a calendar year. With a TFSA to TFSA transfer, it likely takes 1-2 weeks to complete the transfer each way. And what if the market moves in the meantime? If this wasn't a TFSA, it would be a slam dunk going to EQ or any other online bank because money can be moved in just a few business days.

IMO, for a difference of 1.6% to 3.0% interest, it would take a lot of money to worry about an interest difference of $7/$1000 in a 6 month time frame, not counting potential 'dead' time during transfers. 

Added: Stock prices easily move 1% in a day and in recent times, we've seen a number of stocks move 5-10% up and down. That opportunity can be easily lost if it takes 1-2 weeks to move money and that attempt at an additional 1.4% interest will have been nothing but a boat anchor.


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## Koogie (Dec 15, 2014)

AltaRed said:


> It could be given the right market conditions, e.g. October. The OP is only guessing (in my opinion) given the potential differences in wording of his/her posts.


You're reading into their intentions. I'm only basing it on what they've actually said. Neither might end up being accurate.



AltaRed said:


> And what if the market moves in the meantime? If this wasn't a TFSA, it would be a slam dunk going to EQ or any other online bank because money can be moved in just a few business days.
> Added: Stock prices easily move 1% in a day and in recent times, we've seen a number of stocks move 5-10% up and down. That opportunity can be easily lost if it takes 1-2 weeks to move money and that attempt at an additional 1.4% interest will have been nothing but a boat anchor.


Huh ? The OP said they were liquidating stocks and going to cash. And then cash for 6-12 months. So what do short term market movements have to do with anything when they are out of stocks ?


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## AltaRed (Jun 8, 2009)

I am sure the OP will figure out whether trying to scrape up some "minor" incremental interest going elsewhere is worth the time and effort (and limitations) for whatever ends up being the time frame. If nothing else, the OP is seeing two different perspectives.


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## Jimmy (May 19, 2017)

You can go w some ultra short term FI ETFs w durations of ~ 6,7 mos , like a money market fund so little worry of any losses. YTM s of 2.4 % after fees. HFR, ZST from BMO. Very liquid . No muss no fuss


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## agent99 (Sep 11, 2013)

like_to_retire said:


> Apples and oranges. The HISA will preserve your capital, the ETF may not.
> 
> Note there's no commission to buy and sell HISA's, as they are classed as a mutual fund.
> 
> ltr


Yes - Stay away from bond etfs, especially now for short term.


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## AltaRed (Jun 8, 2009)

Jimmy said:


> You can go w some ultra short term FI ETFs w durations of ~ 6,7 mos , like a money market fund so little worry of any losses. YTM s of 2.4 % after fees. HFR, ZST from BMO. Very liquid . No muss no fuss


Looking at ZST. It has declined in market price from $60 in 2011 to $51 today, or from $52 to $51 in one year. It has had a total return of 1.5% YTD (1.47% in 2017) and that is before commissions, and possibly pre-MER of 17bp (didn't dig further on Morningstar). The price decline ate up a lot of that YTM......

As Agent99 said, stay away from bond ETFs of any kind......


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## Jimmy (May 19, 2017)

AltaRed said:


> Looking at ZST. It has declined in market price from $60 in 2011 to $51 today, or from $52 to $51 in one year. It has had a total return of 1.5% YTD (1.47% in 2017) and that is before commissions, and possibly pre-MER of 17bp (didn't dig further on Morningstar). The price decline ate up a lot of that YTM......
> 
> As Agent99 said, stay away from bond ETFs of any kind......


Disregard foolish ytd yields which don't include dividends. You left out the fact the annualized div yield was 2.94% in the same period. It still has a ytm of 2.61 % over a 6 month period is all you need to know which takes into effect the cap gain moves. Its past price performance is irrelevant for the same reason. It isn't really a bond etf either. More like a CP or money market fund.

Read this graph for either of your periods. It is a straight line upwards. You can stay away from them to your own detriment

https://www.bmo.com/gam/ca/advisor/...sh!overview#fundUrl=/fundProfile/ZST#overview


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## james4beach (Nov 15, 2012)

ZST does look almost cash like, but it still fluctuates a little bit even when distributions are taken into account. Using either stockcharts or the performance chart on BMO's page, you can find periods such as November 2014 - February 2015 where the price (total return, including distributions) was down -0.7% net in a short period. A loss of 0.7% over 3 months isn't the same as cash, so there is _some_ risk.

That's nowhere near the volatility on a regular bond fund, but still worth considering. ZST looks pretty interesting, 2.4% yield after fees with a bit of volatility risk.

I usually go with DYN6000 myself (1.60%) as it's the simplest, actual savings deposit with no trade fees. But in the search for higher yields both PSA and ZST might be good too.


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## AltaRed (Jun 8, 2009)

Jimmy said:


> Disregard foolish ytd yields which don't include dividends. You left out the fact the annualized div yield was 2.94% in the same period. It still has a ytm of 2.61 % over a 6 month period is all you need to know which takes into effect the cap gain moves. Its past price performance is irrelevant for the same reason. It isn't really a bond etf either. More like a CP or money market fund.
> 
> Read this graph for either of your periods. It is a straight line upwards. You can stay away from them to your own detriment
> 
> https://www.bmo.com/gam/ca/advisor/...sh!overview#fundUrl=/fundProfile/ZST#overview


You miss the point. I have not quoted a single yield in my post and don't care what the yield is. If I am only going to hold something for 6-12 months as the OP is suggesting, I only care about total return performance, and that is what I AM quoting, 2018 YTD total return of 1.5%, and 2017 total return of 1.47%. The OP is better off in the certainty of a broker's HISA of 1.6% yield.


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## Jimmy (May 19, 2017)

AltaRed said:


> You miss the point. I have not quoted a single yield in my post and don't care what the yield is. If I am only going to hold something for 6-12 months as the OP is suggesting, I only care about total return performance, and that is what I AM quoting, 2018 YTD total return of 1.5%, and 2017 total return of 1.47%. The OP is better off in the certainty of a broker's HISA of 1.6% yield.


No you aren't quoting total return. Again your Morningstar # is 'price' return ( or yield ) not total return. It states it plainly on the site under Performance where it lists Total Return ZST (Price) or NAV ( price) ie Price only and excludes the dividends return.

Again and for the last time the total return or ytm ( over 7 months) is 2.94% again which includes dividend return. Please read the BMO link again.


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## like_to_retire (Oct 9, 2016)

Jimmy said:


> No you aren't quoting total return. Again your Morningstar # is 'price' return ( or yield ) not total return. It states it plainly on the site under Performance where it lists Total Return ZST (Price) or NAV ( price) ie Price only and excludes the dividends return.
> 
> Again and for the last time the total return or ytm ( over 7 months) is 2.94% again which includes dividend return. Please read the BMO link again.


I create 2 graphs of ZST on the TMX graphing tool.

Graph 1 shows the price only of ZST and Graph 2 includes dividends. 

The total return over the last year calculates to 1.71445%. This exactly matches the graph on the BMO site for the last year of 1.71%. 

I would think with buy and sale commissions and messing around every tax time with tax characteristics of possible capital gains/ROC/Income, a simple HISA at 1.60% would be a better fit for the OP.


ZST SHARE PRICE ONLY - 1 year
View attachment 19138


ZST with Dividends - 1 year








ltr


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## agent99 (Sep 11, 2013)

Jimmy said:


> No you aren't quoting total return. Again your Morningstar # is 'price' return ( or yield ) not total return. It states it plainly on the site under Performance where it lists Total Return ZST (Price) or NAV ( price) ie Price only and excludes the dividends return.
> 
> Again and for the last time the total return or ytm ( over 7 months) is 2.94% again which includes dividend return. Please read the BMO link again.


No horse in this race, but just wondered what my newly found compound returns calculator would say. 1 yr plotted.


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## AltaRed (Jun 8, 2009)

So much for using Morningstar then for some information. Morningstar is my 'go to' source for almost everything.


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## like_to_retire (Oct 9, 2016)

AltaRed said:


> So much for using Morningstar then for some information. Morningstar is my 'go to' source for almost everything.


I really like the Morningstar Quant Report for equities. It's always up to date, and provides a lot of information in a small space. TDDI offers it in their Reports section.

I always like going to the TMX graphing section when I want to see return with dividends added in. Most sites only offer share price.

ltr


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## AltaRed (Jun 8, 2009)

I like TMX as well and use their charts extensively.


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## Jimmy (May 19, 2017)

like_to_retire said:


> I create 2 graphs of ZST on the TMX graphing tool.
> 
> Graph 1 shows the price only of ZST and Graph 2 includes dividends.
> 
> ...


I agree and think you are right for last year. Maybe going forward too. The ytm is ~ 2.45% after fees, commissions could really eat into that as well. For me, I would be leaving the cash in longer as a holding so it looks good.


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## like_to_retire (Oct 9, 2016)

Jimmy said:


> I agree and think you are right for last year. Maybe going forward too. The ytm is ~ 2.45% after fees, commissions could really eat into that as well. For me, I would be leaving the cash in longer as a holding so it looks good.


Oh for sure Jimmy, and in your scenario I think this is a very useful and interesting product. I wasn't aware of it before, so thanks for bringing it up.

But, in the case of the OP or other similar situations, if someone wants to absolutely preserve their capital for whatever reason, for a short fixed length of time, they have to accept an HISA return to ensure they preserve their original capital.

ltr


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## Jimmy (May 19, 2017)

like_to_retire said:


> Oh for sure Jimmy, and in your scenario I think this is a very useful and interesting product. I wasn't aware of it before, so thanks for bringing it up.
> 
> But, in the case of the OP or other similar situations, if someone wants to absolutely preserve their capital for whatever reason, for a short fixed length of time, they have to accept an HISA return to ensure they preserve their original capital.
> 
> ltr


I know. I heard about it on 'Market Call' on BNN when they had an ETF expert taking calls. It was one of his "Top picks'. He said is was great for a 'cash' holding. Just recall him saying the price stayed the same so very safe too. I want to put $ into FI ETFs but not LT funds w interest rates rising . Was really surprised how high the return was. HFR from Horizons is similar and an active fund. 

Btw BNN Market Call and Market Call Tonight are great shows for stock and ETF picks. Have really learned a lot from them.


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## james4beach (Nov 15, 2012)

ZST is interesting. It looks like the Canadian version of the American MINT. That's another ultra short term (money market) fund that does quite well with cash-like returns at the short end of the term. Both ZST and MINT have similar risk of small % declines, but still much more stable than the competing XSB, VSB, XSH, VSC.


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## like_to_retire (Oct 9, 2016)

Jimmy said:


> I know. I heard about it on 'Market Call' on BNN when they had an ETF expert taking calls. It was one of his "Top picks'. He said is was great for a 'cash' holding.


Yeah, interesting. I know for myself, I'm big on holding between 2 and 3 years expenses in my cash emergency fund. Some may think that's excessive, but whatever. It's all in TDDI HISA at 1.6%. It swings between 2 and 3 years as a result of buying and selling equities and taking advantage of bargains, etc. TDDI HISA is very good for that situation.

But, there's a bulk amount of about 2 years expenses that I never go below, and I have oft wondered if there was anything that might offer a better rate that could still be considered emergency funds, but over time would offer a better total return. This super short ETF might met that criteria.

ltr


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## james4beach (Nov 15, 2012)

like_to_retire, any chance you can hold it outside of the brokerage? Credit unions are going to give you higher than 1.6%. But if you want to keep it available inside the brokerage, I think PSA & ZST might be good options provided the trade costs don't outweigh the yield advantage. And MINT for USD cash. I am considering using these as well.


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## james4beach (Nov 15, 2012)

I'm seeing consistent performance figures from the TMX charting tool, stockcharts.com, and Morningstar. For the trailing 1 year to Jan 15,
2.07% ZST
1.69% PSA
1.26% HISA (TDB8150), by weighting rates throughout the year

And the current yields of these, after subtracting MERs, are
2.41% ZST
2.15% PSA
1.60% HISA (TDB8150)

PSA provides an advantage over the HISA vehicles, ignoring trade fees, but it's been banned at RBC and TD. I'm surprised they can get away with that; isn't that anti-competitive behaviour?

There's also a higher return from ZST but this one is a bit riskier than cash, as the price fluctuates and the fund holds quite a bit in lower credit grades, 37% rated BBB. That's where your extra return comes from, and there could be a loss. I'm not convinced ZST is a good deal, since you lose CDIC insurance and get a bunch of risk of loss for only 0.8% more yield.

Myself, I keep nearly all cash in bank high interest savings accounts with good yields and I still think that's better than these options. I put remaining cash leftovers in TDB8150.


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## Onagoth (May 12, 2017)

Unfortunately Questrade has no HISA for cash balances and they don't credit interest.

So when I have cash sitting around (like now) I use PSA for CAD and PSU.U for USD. Gets around 2.3% with a 0.15% management fee. Free to buy but 4.95 to sell.

Not the best game in town, but not sure what else can be done.


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