Q: Hi,
If I invest in a high interest savings ETF like CASH, am I taking risk on my principal? Or am I just taking risk on what interest rate I'm earning?
It seems like there is a bit of a principal risk. Would the price go down if the rates go down?
Thanks,
If I invest in a high interest savings ETF like CASH, am I taking risk on my principal? Or am I just taking risk on what interest rate I'm earning?
It seems like there is a bit of a principal risk. Would the price go down if the rates go down?
Thanks,
5i Research Answer:
These ETFs trade like stocks so at times there could be very minor market risk if one is selling into weak demand, and the market maker is concerned enough to back off bids. It is important to note these are not guaranteed by anyone. They invest in high interest deposits with Canadian banks and should be very safe--just not up to a guaranteed level. Units fluctuate a little bit: CASH 52-week range, for example, is $50.21 to $49.98. Someone buying at the high and selling at the low would lose a little bit of principal on the trade. For a full guarantee, investors can buy GICs (guaranteed to $100K) or Canada Treasury Bills (full guarantee on any amount).