Long-Term Investor Meeting Minutes January 30, 2020

The Best Place to Park Cash Other Than the Savings Account

Attendees: Kim, Glen, Frank, Wilson+ 1 friend, Henry, Lindsay, Alex, Edison and Stella (9 people).

Minutes by Stella. Contact @ bridgetranslationservices@hotmail.com

Places to park cash that were discussed by the group in combination with Stella’s own research

Options for Emergency Cash Reserves and cash and the amount that you feel you need to :

1) High-interest savings account

• Lindsay said her robo-advisor WealthSimple account pays 2.4% on cash
• Highest: Laurentian Bank Digital (LBD) pays 3.3% Places that focus on online banking than walk-in branches pay
more and usually credit unions pay more than the big banks
• Lowest: Big four banks like RBC and TD pay </= 1%
• Average: 2%
• A chart of high interest savings account comparison: https://www.highinterestsavings.ca/chart/
• Written reviews here: https://www.ratehub.ca/blog/the-best-high-interest-savings-accounts-in-canada/
2) In TFSA
• People older than 18 gets additional $6,000 TFSA room on Jan 1, 2020.
• Financial companies tend to offer a lot of short-term high interest rates promotions to entice investors to
move into their accounts but if you are going to leave your money in there for more than 3-6 months, it’s
better to look for an account that offers a regular high interest rate. Beware if there is a limit on the deposit
• In general, TFSA rates reflect high-interest savings account interest rates with credit unions or smaller, lessor
known or digital-focused banks offer the highest while big four banks offer the least. You can also buy GICs
and bonds in your TFSA
3) In RRSP
• The RRSP contribution limit for 2020 is $27,230 per person
• In general, RRSP rates reflect high-interest savings account interest rates with credit unions or smaller,
lessor known or digital-focused banks offer the highest while big four banks offer the least. You can also
buy GICs and bonds in your TFSA
4) GICs
• Short-term (less than 1 year): RBC offers short-term 30-day, 6 months and 9 months GIC at 1.65%
https://ca.rbcwealthmanagement.com/documents/10180/0/gicrates.pdf
• Long-term (1-5 years): All big banks, smaller banks or credit union pay similar rates on GICs at slightly
less than 2%
• A one-year GIC pays slightly less than a 5-year GIC by 0.13%. So you don’t get paid a lot more for locking
yourself in a 5-year GIC than a shorter-term one.
5) Money Market Fund (unlike GIC, usually no early-redemption fees but has management fees):
• Money Market Funds: Consists of government treasury bills (T-bills), bonds and corporate debt that
mature less than 1 year.
• The fund costs $1 per share or net asset value (NVA). The principal you invested in Money Market Fund
does not increase.
• In a market crises, like the one in 2008, the some money market fund run by small financial companies
“broke a buck”, it means the NAV went under $1. Stick with large companies for money market funds
5) Money Market Fund Continued…
• Cons: The downside is the money market has a management fee and, unlike GIC or savings, is NOT
insured by the CDIC. With interest so low, the management fees can reduce the 1-2% return down to
0.75% - 0.50% in the money market

Examples:

• Money Market Fund from RBC, a Canadian Bank:

http://funds.rbcgam.com/pdf/fund-facts/funds/rbf271_e.pdf This fund returned 1.15% in 2018 after
0.6% fees.
• Money Market ETF from iShares: This fund returned 2.33% in 2019 with total fees at 0.15%. The actual
return is 2.18%. https://www.ishares.com/us/products/239466/ishares-short-treasury-bond-etf
• Money Market Fund from Vanguard, a US index fund company, in USD amounts
https://investor.vanguard.com/mutual-funds/profile/overview/vmmxx This fund returned 2.17% but it
looks like before the fees of 0.16%. There are additional cost like account maintenance or minimum
amounts here. So after all, the actual return will be a slightly less than 2%.