RateSupermarket.ca displays, for a deposit of $50,000 CDN, high-rate savings accounts (abbreviated as HRSA) that yield as highly as 1.75% from Implicity Financial, 1.50% from Scotiabank, and 1.05% from Tangerine.
These returns transcend those of Canadian money market funds (abbreviated as MMF); this article from Jul 22 2013 lists the highest annual percentage return as 0.98% from Steadyhand Savings.
Also, MMFs are riskier than high-rate savings accounts (eg: Scotiabank and Tangerine belong to large banks in Canada, and so are relatively safe).1
How does the superiority of HRSAs still not negate and exterminate MMFs?
Why would one invest still in MMFs? What have I misapprehended or neglected?
1Source: p 147, Investing For Canadians For Dummies, 3 Ed (2009) by Tony Martin, Eric Tyson
The lack of CDIC insurance on a money market fund shouldn’t trouble you. Mutual fund companies can’t fail because they have a dollar invested in securities for every dollar that you deposit in their money funds. By contrast, banks are required to have available just a fraction of every dollar that you hand over to them.
A money market fund’s investments can decline slightly in value, which can cause the money market fund’s share price to fall below a dollar. In a few cases, money market funds have bought some bad investments. However, in each and every case except one, the parent company running the money market fund infused cash into the affected fund, thus enabling it to maintain the $1-per-share price.