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Purpose High Interest Savings Fund (PSA)
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Horizons High Interest Savings ETF (CASH)
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High Interest Savings Account ETF (HISA)
My partner I are doing financial planning, we will need a relatively significant (to us) amount of cash in the next 2-5 years for replacing aging cars and a down payment on a larger house.
I am always hesitant to hold cash/GICs for fear of missing out on growth opportunities. Currently, almost all the funds in our RRSPs and TFSA's are invested EXCEPT a long term GIC that came to term and is now sitting in cash (some in TFSA, some in Non-registered). We will need all this cash in the next 2-5 years.
I am looking for ideas on how to manage the cash.
Right now, the best option I can see is GICs with various terms, do you have any other suggestions or ideas to consider?
(we have already owned a house, so cannot use RRSP loan or the new FHSA)
Thanks
While we cannot personalize responses, the tradeoff of investing in cash products like GICs is the ability to shorten one's time horizon. Investing in growth stocks, or even the broader markets can force one's horizon to be stretched out, as periods of volatility occur frequently (10% drawdowns occur roughly every two years, and 25% corrections happen roughly every six years). These instances are nearly impossible to predict, and if an individual has short-term liquidity needs, these corrections would be some of the worst times to be a forced seller in.
We believe there is nothing wrong with accepting a lower return in exchange for peace of mind and assurance that liquidity is there when one needs it.
Currently, there are high-interest savings ETFs available to investors that offer stability of investment and roughly a 4% to 5% annual distribution yield. We like PSA, HSAV, and HISA for these purposes. In the event that interest rates are cut later this year or next year, these yields will fall, however, and so there is a tradeoff of easier access to liquidity with high-interest savings ETFs vs. a GIC.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in PSA.