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We have reached a point with rising interest rates where you can earn a respectable return holding cash in an investment account.

Not a great return, nor anything that will propel you toward any of your long-term financial goals. But you can earn 3.25 to 4.15 per cent or so as of early November, which compares with not much better than zero a couple of years ago.

Now’s a time to think about starting to feed money into the markets – stocks and bonds – if you have a long-term perspective of five to 10 years or more. But it’s understandable if you prefer to pause and observe. Inflation is still a problem, central banks have more interest rate hikes to come and the risk of recession is considerable.

The most recent increase in the Bank of Canada’s overnight rate has pushed the return on cash-alternative exchange-traded funds, also called high interest savings ETFs, to around 4.15 per cent on an after-fee basis. The companies offering these ETFs include CI, Evolve, Horizons, Ninepoint and Purpose. The product is pretty standard from company to company – assets in the fund are invested in big bank savings accounts that pay rates well above what retail clients get. Fees tend to be in the range of 0.15 per cent.

High interest savings mutual funds have been around for ages, but returns lately have boosted their appeal considerably. Expect 3.25-per-cent returns from these products, which typically offer the benefit of deposit insurance. Cash-alternative ETFs do not offer deposit insurance, but their underlying deposits can be considered low risk because they’re held at big banks.

A drawback of cash-alternative ETFs is that some online brokers charge you commissions of up to $9.99 to buy and sell them. These products are ideal for clients of brokers and trading apps that have no trading commissions, or for brokers that let you at least buy ETFs at no cost.

High interest savings mutual funds are a reasonable alternative if you want to avoid brokerage commissions on cash-alternative ETFs. They’re also your only choice if you’re a client of BMO InvestorLine, RBC Direct Investing and TD Direct Investing. These brokers do not allow clients to buy cash-alternative ETFs; instead, they offer in-house investment savings mutual funds.

The RBC Investment Savings Fund can be purchased at RBC Direct Investing with no commission, and the rate as of recently was 3.25 per cent. That’s nothing to get excited about, but it’s enough to help you keep your self-respect as a cautious investor waiting to get into the market.

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