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The question of what the best parking spot for cash is right now is best answered with a two-word phrase that I usually hate.

“It depends.” If there’s a more useless answer to personal-finance questions than that, I haven’t come across it. But in this one case, it’s actually helpful because it highlights the two-track thinking that should go into decisions about holding cash.

Is the cash part of your savings for short- or long-term purposes, or is it a component of your investment account that might be deployed at any time? In the latter case, maybe it’s to take advantage of bargains after a horrible run for the stock market.

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Savings refers to money you must keep safe and thus should be parked safely in a savings account offered by a bank. Cash in your investment account is best kept in one of the products I covered in a recent Portfolio Strategy column.

One option is a high-interest savings account that trades like a mutual fund and offers a yield of 1.6 per cent these days, at best. Another is a savings account exchange-traded fund, which offers a yield closer to 2 per cent. Check my column to find out which online brokerage firms offer these products.

Readers contacted me after that column was published to ask why they’d keep money in products with yields of 1.6 to 2 per cent when they can get 2.25 per cent or more in savings accounts at online banks such as Alterna Bank, EQ Bank, Motive Financial, Oaken Financial and others.

The answer is liquidity. Those accounts are great for savings, but it can take days for that money to get transferred into your investment account and then deployed into stocks, ETFs, mutual funds, bonds or whatever.

The lesser yield you get on high-interest accounts that trade like mutual funds and savings account ETFs is the price of having your cash close at hand and thus readily available to exploit opportunities in the market. If you’re holding cash for emergencies, trips, home down payments, sabbatical years or other life events, use a savings account for sure.

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