High interest rates and choppy markets have brought us a rare moment when holding cash in your investment account seems a reasonable thing to do.
Let’s be clear that holding cash long term won’t likely get you where you need to be in building the value of your investments for, say, retirement. You’ll need more risk in the form of stocks and bonds for that. But just at this moment, you can safely hold cash and earn between 4 and 5 per cent. With both stocks and bonds looking volatile in early March, that’s something.
There’s just one problem with investing vehicles for holding cash right now. How do you find the right one for your account? A broker with an answer to that question is, ironically, BMO InvestorLine. Memo to other digital brokers: Please imitate BMO on this, soonest.
Check out the InvestorLine trading page and you’ll see a tab that reads HISAs, GICs & Bonds. Eureka - BMO is the first broker I’ve seen to give investors an easy way to find high interest savings account mutual funds. HISA mutual funds hold client money in bank deposits with rates in the 4 per cent to 4.5 per cent range.
InvestorLine offers six HISA mutual funds - three in Canadian dollars with a rate of 4.35 per cent and three in U.S. currency with a rate of 4.25 per cent. There’s nothing else on the menu, and this is why it’s ironic that InvestorLine has taken the step to highlight HISAs for clients.
Along with RBC Direct Investing and TD Direct Investing, InvestorLine does not allow clients to buy competing third-party HISA mutual funds, or a different spin on this product called the HISA exchange-traded fund. HISA ETFs are bought and sold like stocks and have yields of about 4.85 per cent these days.
Still, InvestorLine deserves some credit for recognizing a change in investor sentiment toward holding cash and adjusting its website to accommodate this. Competing brokers make it much tougher to find a HISA mutual fund. You basically need to find one yourself and then type its fund code into your broker’s mutual fund order screen. If you’re using the search function on your broker’s fund screen, try looking for HISA options in the money market category.
Also try a google search for HISA mutual funds. You definitely want to compare a few different funds because rates differ by 0.5 of a percentage point or more.
-- Rob Carrick, personal finance columnist
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Introducing the Globe Investing Club
Like many of you, we at Globe Investor enjoy chatting about promising stocks and speculating about which ones will do best. As such, we’re launching the Globe Investing Club. Think of the club as a lighthearted effort to distill our team’s collective wisdom into a Hot List of stocks. The Hot List is a checklist of ideas we consider unusually promising or interesting. And we’re inviting readers to chime in with their own picks. Ian McGugan explains how it all works, and reveals our Hot List.
The Rundown
What if interest rates stay high for a few years?
What would you do if inflation and interest rates remained high, not just for the rest of this year, but for a few years to come? It’s a question that investors and homeowners might want to start thinking about, given recent readings from Europe and the United States. Ian McGugan explores the topic.
Goldilocks, nightmare or something in between? Three ways 2023 could play out
We’re more than two months into 2023, and no one can say with any certainty how it will turn out. It’s not that we’re lacking predictions. There are lots of those, from central banks, economists and brokerage analysts. But there’s uncertainty and a lack of conviction - and that makes investors nervous. Gordon Pape sees three possible scenarios that we could see over the next 10 months. The differences between them will make a huge impact on portfolios.
Stock pickers reckon it’s time to move on from central banks
Stock market investors are calling time on the idea that the Federal Reserve, and other major central banks, have their back. Hopes for interest rate cuts by year-end have evaporated, given resilient data and sticky inflation, suggesting central banks will instead be inclined to keep borrowing costs around their highest since 2007 for some time. The take away for money managers? Switch from so-called growth stocks, such as tech, and focus on businesses that can withstand the end of cheap funding - banks that benefit from higher rates and resources and consumer staples businesses that can sell goods at prices that match inflation. Companies that pay high dividends relative to their share prices, instead of investing in growth, are also favoured. Naomi Rovnick of Reuters explains.
Banks had a lot to say about the economy this week, but little clarity
After Canadian banks finished reporting their latest quarterly financial results this week, investors hoping for some clarity on the economy may have come away disappointed. As David Berman reports, there was no clarity - and that may very well limit any recovery in bank stocks.
2023 Globe and Mail ETF Buyer’s Guide Part Two: Canadian bond funds
Awful as their returns have been, bond ETFs keep attracting a healthy flow of money from investors. The reason is that diversified portfolios need bonds, and exchange-traded funds are a great way to access them. For help in choosing a bond ETF suitable for your portfolio, consult this second installment in the 2023 Globe and Mail ETF Buyer’s Guide.
China’s low growth target takes some wind from commodities’ sails
China’s decision to set a modest 5% economic growth target for 2023 may knock some optimism out of commodity markets, which had been anticipating a surge in demand from the world’s largest buyer of natural resources. Clyde Russell of Reuters reports.
Others (for subscribers)
The most oversold and overbought stocks on the TSX
Changes coming for Canada’s big stock index
Monday’s analyst upgrades and downgrades
Monday’s Insider Report: CEO invests over $1-million in this Big 5 bank stoc
Globe Advisor
Why Canadian spin on single-stock ETFs offers more risk-adjusted approach for investors
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Ask Globe Investor
Question: Can you explain what is going on with TC Energy Corp. (TRP-T)? The shares have fallen about 20 per cent in the past year, and the yield is now about 6.6 per cent, which makes me nervous. Should I be worried about a dividend cut?
Answer: The stock’s 6.6-per-cent dividend yield is well above TC Energy’s five-year average of about 4.9 per cent, but it’s not so egregiously high that it’s signalling a dividend cut. Indeed, TC Energy raised its dividend by 3.3 per cent in February – the 23rd consecutive annual increase – which is not what one would have expected if the dividend were in any danger. It’s also worth noting that, on the fourth-quarter earnings call in February, TC Energy’s chief executive officer, François Poirier, reiterated that the company expects to continue to grow its dividend at an annual rate of 3 per cent to 5 per cent.
But in light of the many uncertainties facing the company, TC Energy’s share price could remain under pressure for a while.
Read John Heinzl’s full response to this question here.
What’s up in the days ahead
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Compiled by Globe Investor Staff