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Low interest rates have turned money market funds into dead money.

Though they’ve been superseded by better alternatives, money market funds still hold billions of dollars belonging to retail investors who want to keep cash parked safely. Fees on these funds can be in the range of 0.3 to 0.6 per cent. Returns lately have ranged around zero.

Basically, low interest rates have choked off returns from money market funds. After fees are applied, there’s nothing left for investors. Find a better place for your cash as soon as possible.

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A reader recently contacted me to ask about the $270-million iShares Premium Money Market ETF (CMR-T) and why there have been no monthly cash payments since last September.

“With interest rates so low, the monthly distributions have paused as the fund does not have any net income to distribute,” BlackRock Canada said in an e-mailed explanation.

CMR holds a mix of government-issued Treasury bills and short-term borrowings by banks and corporations. BlackRock noted that three-month Government of Canada T-Bills yielded just 0.06 per cent as of early February, and one-year T-bills just 0.13 per cent. The management expense ratio (MER) of CMR is listed on the iShares website at 0.28 per cent.

The price of CMR has been steady between $50 and $50.06 over the past 12 months, which means the shares have been treading water. With interest payments included, the one-year total return amounts to just 0.48 per cent. The outlook for the next 12 months: bleak.

Investors have to accept that returns for keeping money safe in cash or cash equivalents these days are weak. But there’s no reason to accept returns of zero on your cash. High interest savings account mutual funds have interest rates of 0.25 per cent these days, with no MER to speak of, and you can buy and sell them through most online brokers at no cost. If you don’t mind parking your cash somewhere besides your investing account, there are online banks and credit unions with savings accounts offering as much as 1.5 per cent to 1.8 per cent.

The exchange-traded fund world’s version of the high interest savings fund typically offers a return of about 0.6 per cent after fees, but regular brokerage commissions apply when you buy and sell them. Among the ETF companies offering these funds are CI First Asset, Horizons and Purpose. These products are practical for larger accounts, or any account at an online broker that waives commissions on ETF trades or, at least, on purchases (more information can be found in the latest Globe and Mail Online Brokerage Ranking.

Decades ago, when interest rates were much higher, money market funds were a big deal. They’ve been losing appeal ever since and now they’ve hit rock bottom.

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For more on high interest ETFs and mutual funds (including which brokers limit clients to buying in-house products), consult The Globe’s DIY investor’s guide to the best places for parking cash in an online broker account.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

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