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Abbreviate High-interest Savings Accounts to HISAs. This question is restricted to ETFs that can be traded in only Canada.

This question assumes the superiority of investing in ETFs, over HISAs. Beware that I question a different premise here, which concerns BETFs and not just any ETF.

I already know that ETFs are riskier than HISAs, but how do I determine which ETFs in general can approximate the safety of HISAs, but yield a better rate of return (eg > 1.25% annual interest rate)?

  • Specific product/service recommendations are off-topic here. I suggest you remove the request for "which" and just ask the "how do I determine..." part of your question. – Chris W. Rea Jun 30 '15 at 16:23
  • @ChrisW.Rea Thanks for the advice. Better now? – Greek - Area 51 Proposal Jun 30 '15 at 17:39
  • Short answer: Unlikely to get higher returns without more risk. But unlike ETFs, the saving account may be insured by the government (check this). That's the only trick, but it works in the opposite direction. – Anton Tarasenko Jun 30 '15 at 18:23
  • @Anton Thanks. I know that more risk entails, but which ETFs offer the minimal risk? – Greek - Area 51 Proposal Jun 30 '15 at 19:03
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    On the other hand this site embraces government bonds with 8 year duration. How about people go screen all 65 Fixed Income ETF in the Canada universe before downvoting. – base64 Jul 1 '15 at 10:20
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Bond funds add additional risks over savings accounts though it should be noted that inflation risk is actually more important for low-yielding HISAs. A good measure of the relative magnitude of interest rate risk between bond etfs is effective duration which should be readily available. While you may experience more variability with bonds over savings accounts for a long term investor the higher yield will generally win out.

Generally a hierarchy of bond risk would look something like this for a Canadian investor:

  • Canadian government and province bond etf roughly doubling your yield of HISA (after fees) and may have tax advantages as well though I'm not knowledgeable in Canadian taxes.
  • Canadian government, regional, and corporate bond etf adding some risk for individual corporations but since you own a small slice of many corporations the added risk is small. This will further add to your yield and adds a bit of diversification.

Foreign bond etfs that hedge back to Canadian Dollar can have more or less risk/yield depending on the mix than local bonds and can add some very useful diversification to a Canadian bond portfolio. However, if they aren't currency hedged though they can add significant currency risk. This is not necessarily a terrible thing but something to keep an eye on.

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