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BMO Ultra Short-Term Bond ETF (ZST $49.03)
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Global X Cash Maximizer Corporate Class ETF (HSAV $115.74)
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Global X High Interest Savings ETF (CASH $50.06)
Q: I’m thinking of switching my cash from CASH and HSAV to ZST. The reason is ZST now has a higher yield than CASH and HSAV (3%+ versus 2.6-2.7%)The intended duration is about 1 year.
What are the risks associated with ZST? Is ZST riskier than CASH and HSAV?
What are the risks associated with ZST? Is ZST riskier than CASH and HSAV?
5i Research Answer:
ZST is a short term bond fund, which should be considered riskier than a high interest savings ETF. 97% of its securities are corporate, which adds a bit of risk. While 'short term', 31% of its holdings still do have a maturity date of more than 5 years. Thus, it will be more sensitive to interest rates than the others mentioned. Plus, high interest savings will see yields increase when rates rise, but bond funds may see the value of the holdings fall. Having a shorter average term helps, but there remains risk in ZST, and it should be considered riskier. For example, the fund fell in each of the years 2020, 2021 and 2022.