Q: Checking into where to park some cash and looking into TD Cash ETF TCSH. Assuming this is invested in capital safe investments for interest income why does the price chart show its been on a decline, small amount but was expecting up and down based on distribution payouts but neutral, the chart shows an overall decline. Why?
5i Research Answer:
Interest rates in Canada have slowly declined since 2022, and this is reflected in the interest income paid out by the ETF. While lower rates can boost the prices of fixed-income securities, TCSH invests in very short term securities and these are far less sensitive to rate moves. Its average maturity is very very short, so total return is based nearly all on income. With declining rates, the variable distribution has gone from 24c 17 months ago to a recent 9c for the September payment. Lower income has made the ETF less attractive to income investors. Still, for a very safe fund, its one-year total return is 3.63%, which is comparable to other 'cash' funds out there.