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moneysense.ca, 27/06/06
Rob Carrick’s Tip
Getting a decent yield on the cash in a brokerage account is a hassle. Most money market accounts charge a MER of 0.9% and transferring money to a high-interest savings account is not practical for funds held inside a RRSP.
Rob Carrick, personal finance columnist for the Globe and Mail, offers an excellent tip for the cash portion of your portfolio: The Altamira CashPerformer (AIS100). The CashPerformer offers a current yield of 3.75% and can be purchased through your discount broker (I checked with RBC ActionDirect). Here are the key features:
- CashPerformer is just like a high-interest savings account. It is insured by CDIC, up to a maximum of $100,000.
- Interest is calculated on daily balances and paid monthly.
- There is no minimum limit but discount brokers impose a limit. Action Direct, for instance, imposes a minimum initial investment of $1,000 and subsequent minimum additions of $500.
Altamira also offers a US Dollar CashPerformer (AIS101) that pays a rate of 4.5%. There is no CDIC coverage and I am not sure if any protection is available.
Update: The overwhelming consensus in the comments seems to be that AIS100 might not be an ideal choice for parking your cash at discount brokers because of redemption fees and penalties. I checked with RBC Direct Investing and they charge a 1% Early Redemption fee if this fund is sold within 120 days.
moneysense.ca, 27/06/06
I think this is a great idea – I personally have linked my PC finacial account to my CIBC trading account (wasn’t that hard), the interest rate isn’t quite as high – but it works.
I looked up the CIBC details for AIS100 for interest sake:
- There is a $40.00 inital account creation fee(charged by Altamira)
- The minimum intial investment is $1000 and each subsequent investment minimum is $1000.
I will consider this for the cash portion of my daughter’s RESP account.
Dean
Thanks for the tip, I currently have some cash in two RSP accounts; my brokerage account and an ING Direct high interest account but even the ING rate is lower than the rate on the AIS100 (ING is currently 3.10% I think) and I was thinking about a better place to put that cash.
I looked up AIS100 in my TDWaterhouse account and it looks like the minimum is the $1000 you mentioned and it doesn’t look like there are any other fees, except the $40 account creation fee (or even a minimum holding period).
I am surprised by the $40 account creation fee. ActionDirect makes no mention of it. And Altamira clearly states that it charges no fees.
I’ve placed some cash into several GICs(30 day cashable) at 3.95%. As interest rates increase I’ll roll it over into a higher paying GIC. I’ve gone from 3.5 to 3.75 to 3.95 in the last 3 months. I thought this seemed like a good idea .. Is there any advantage to have the money in a high-interest savings account instead?
JB: It seems like a great idea. Do you do this through a discount broker? I checked online with ActionDirect and they don’t seem to even offer a GIC for less than a one year term.
I didn’t actually go through the whole purchase process. I assumed that since some one else mentioned a $40 Altamira account creation fee that it would get added to my purchase as a ‘commission’. Maybe there isn’t a charge.
CC: I do this through BMO Investorline . . the terms are 12 months, but cashable with accrued interest after 30 days . . idea came from Larry MacDonald’s Blog – April 27, 2006 Climbing a ladder of 30-day GICs
I poked arond with the fund on E*Trade. Got so far as previewing an order: I didn’t see anything indicating that there is a $40 charge. Nothing listed under commisions, etc.
Not sure what to think about it. It’s a great idea, but dunno if I want to shell out the $40. If plop some money in short term then withdraw it later, do they close my account? If I go to put that money back into the “fund” later when I move into a cash position, will they ding me $40 again?
I may have to investigate…
Perhaps I am just stating what most already know but…among other accounts, I have a US cash account that I use for actively trading US equities (TD Waterhouse), when I am in cash (thankfully 100% for the last 8 weeks!) it earns 4.25% per annum (this is the rate for the $25,000 – $99,999 balance). This is a pretty sweet return for what is effectively a chequing account with respect to the liquidity of the cash and the lack of fees associated with the account. As a footnote I understand that most don’t want to hold US cash but I don’t mind because it’s not cash I will need anytime soon. Any thoughts on this would be appreciated.
ICICI Bank gives me 3.5% on high interest savings account. They even give you a $20 bonus if you open an account with them. The money can be withdrawn as and when you like.
The $40 charge is applied only if you go through a broker. I talked to Altamira and TD a while ago about this. TD said they were trying to change this, and Altamira said it was a fee cause you go through a brokerage. Altamira also said that if you contact them directly (and send them a cheque for the deposit) they will set up the account with no fee.
You can get 30-day GICs at TD Waterhouse yielding 4%. As for the Altimira Cash Performer Fund, the $40 set-up fee by Altamira was discontinued in 2005. But if you buy through a broker there could be a “redemption fee.” For example, TD Waterhouse will charge $45 to redeem the Altamira CashPerformer fund (if buy through TD Webbroker, there is a 25% discount off the $45, I believe). Anyway, it looks like the Rob Carrick article was wrong to say the Altamira fund can be purchased for no charge through a discount broker. Bottom line? It may be better to go with laddered 30-day GICs. The yield is higher and there are no fees.
[...] In response to yesterday’s post, reader JB left the following comment: I’ve placed some cash into several GICs (30 day cashable) at 3.95%. As interest rates increase I’ll roll it over into a higher paying GIC. I’ve gone from 3.5 to 3.75 to 3.95 in the last 3 months. I thought this seemed like a good idea. Is there any advantage to have the money in a high-interest savings account instead? [...]
Yes, TD waterhouse charges $45 redemption fee for Altamira fund. It may not a good idea to use Altamira fund through TD account if you want to temporarily park your cash.
Why not just open up an Achieva ISA? It pays 4.10% which is great. I have it linked to my PCF account and can transfer to it unlimited with no charge and once out of it a month with no charge.
Way more flexible than a GIC and comparable or better rates!
Brock: You can’t use Achieva for the cash portion in your RRSP. Also, note that there is no CDIC coverage for a savings account with Achieva.
Achieva can in fact be used for the cash portion of your RRSP or RRIF. They have a savings account and RRSP savings account both yielding 4.1% right now or GIC with even higher returns.
also deposits are guaranteed by the Credit Union Guarantee Corp of Manitoba. and unlike CDIC all deposits are guaranteed in full no $100k limit like CDIC.
Keep in mind that if you ever need CDIC or some other protection…something REALLY bad has happened becuase our financial system has likely collapsed…so CDIC probably won’t be there to bail you or me out anyway; its mainly peace of mind insuarance…not real insurance.
James: Yes, you can use Achieve for a RRSP. But, if you already have a RRSP account and you have some cash in it (say, by selling some stocks), you want to earn interest on the cash till you are able to inves it. You can’t use Achieva because you can’t transfer funds from within a RRSP (actually you can, but the brokerage will charge a hefty transfer fee).
Re CDIC coverage, note that CDIC is guaranteed by the Government of Canada and has virtually zero risk. Same is not true of Credit Union Guarantee.
I hope this point has not already been made and I missed it above. Watch out buying the CashPErformer fund if you have a Canadian E*Trade account. The small print says that there is a penalty of 1% for withdrawing funds from a newly purchased mutual fund (which unfortunately includes the Altimira fund) within 90 days of purchase. That is a stiff penalty and one which will easily override any benefit to putting funds in that account. It is good that other online brokers do not apparently take the same position.
Certain Discount Brokerages do not charge you if you purchase the Altimira fund.
On TD’s Webbroker it says that Altimira is one of the charge penalty funds.
On Bank of Montreal Investorline the list of no-charge mutual funds includes Altimira.
At Scotia Bank, the list of no-charge funds includes Altimira.
Can someone confirm this – and also if you are at CIBC or RBC can you confirm what the charges are?
If this is the case, maybe we should be choosing our discount broker more carefully? TD has a large list of pentalty charge funds while BMO and Scotiabank seem to have a long list of free-of-charge funds?
CC: Royal Bank, from my experience, has terrible interest rates on savings accounts and GIC’s.
Generally you will always find better rates at Scotiabank, BMO, TD with regards to GIC’s and savings accounts. If you know someone at the bank, you can request that they match or beat a competitor’s price on a GIC – but I’ve had family ask RBC about a high interest savings account and they weren’t able to help. At times they can match GIC’s but they seem uninterested in high interest savings accounts.
I guess RBC thinks they can get away with offering no high interest account, and poor interest rates – even though lots of other Big 5 banks in canada offer high interest accounts (BMO, Scotia) and better interest on GIC’s. We’ll see how many customer’s RBC loses. Even TD has a high interest savings account, but the minimum balance has to be $5000 to gain 3% whereas scotia, PC, Ing, ICICI, offer no minimum balance. But RBC? they don’t even offer good interest on balances above $5000.
Personally I’d like to see RBC offer a competing service, I’d guess that they will lose a few thousand customers from personal banking and action direct for these reasons alone.
I just tried to purchase this fund via my BMO Investorline account but they seem to have it categorized as a money market account so a $25,000 minimum applies?!? Can anyone else verify this? I didn’t think the CashPerformer was a money market fund?? It’s a real pain if I have to maintain $25,000 in cash! Has anyone else run into this?
Has anyone any knowledge of a product offering similar return & risk but taxed as a capital gain?
I expect that larger sums could be invested in strips and sold before maturity.
Can anybody explain to me why I got charged 130$ by Etrade for removing part of the money put in AS100 a few days after the initial transaction?
Maybe I’ve missed something here, but this is certainly one of the worst tips I got so far.
thanks
I am very sorry that you were charged a fee for early redemption at ETrade. The overwhelming consensus seems to be that AIS100 is not a good choice at most discount brokerages because of redemption fees and penalties. Comment # 20 points out that ETrade charges a 1% fee for early redemption including for AIS100.
thanks for the reply!
it is too bad I haven’t read through all the comments … good lesson learned #2
I will try to escalate that a Etrade officialy since the fine prints nowhere to be found when I bought the fund.
Keep on the good work on your site! I really enjoy it!
If I were you, I would write E*Trade a protest letter pointing out that the sell screen should clearly show how much the cost would be to sell the fund. In fact, the buy screen should have a warning message that penalties are involved in selling the fund before a certain date. I will update the post to reflect that penalties may be involved.
It looks to me like TD offers one year GICs that are cashable after 30 days with no penalty, but the interest is not paid until the end of the 1yr term. I still like the AIS100 route if I have enough cash to invest, despite TD’s $45 redemption fee. Say the competition was TD’s Webbroker interest rate on cash(I think it is 1.5%). Then if I move $X to AIS100 and it pays $45+.015/12*X in one month, it seems that I break even. Anything higher is a profit over leaving it in cash in my Webbroker account. I think this means that if I have more than $24000 in AIS100 for a month, it is a better deal than leaving it in my Webbroker account. Of course I can redeem the AIS100 cash before 30 days, but in that case I need more than $24000 to make it worthwhile. For
I’d be interested in learning more about Brent’s idea on strips ($24).
[...] The main purpose of my blog is saving you some money, so it really hurts when something like this happens (in response to this post): Can anybody explain to me why I got charged 130$ by E*Trade for removing part of the money put in AS100 a few days after the initial transaction? [...]
I will write to Etrade … the sel screen did show the fee. But I had no choice to get the money back at that time. As you say, I wish the buy screen had a disclaimer!
I called Etrade to complain (maybe a letter is better?). They really don’t care, but wy would they
I was supposed to know about the fees by going on the HOME page , OUR FEES section. Then go the MUTUAL FUNDS page where it says 0$ fee. Then realize there is a little number tat refers you to fine prints somewere further down the page.
I’ve switched to Etrade for their low fees, but didn’t expect that surprise 1% one!
I just checked with TDWaterhouse and there is no early redemption fee with them, the only fee is a “transaction fee” when you sell of $40 and the person I talked to thought there might be a 25% discount on that if the trade is made on-line. I have some cash sitting in my account right now but I don’t see any stocks I want to buy right now so I think I am going to park it in that fund. I just need to make sure the difference between what I would be making having the money sitting in the account at 0.5% (or whatever it is) and the AIS100 is more than $40 (in the worst case, I’m not counting on that 25% discount).
With all that discussion on cash investing, do we have a conclusion on the best place to store cash for the short term in an investment account?
Etrade has a new cash account that yields 4.15% . Not bad …
I am using TD for my RRSP. I am thinking transfer it to E-Trade without selling the stocks I have with it. Is this a favorable way? Please advice
Send Altimira a cheque, ICICI a cheque, Achieva a check, ING direct a cheque, and all the other places that offer high interest savings accounts – split the money into small enough amounts that they won’t send you an income tax receipt (I forget what the minimum is before they send you an income tax receipt). If you invest all the money into one high interest savings account they send you an income tax receipt.. i.e. if you make $500 interest on $20,000 then you get an income tax receipt but if you open up say.. 10 accounts.
Might be too much work for you all, just an idea. I realize the Canada Revenue agency can still trace your interest income – but how many of us really claim interest on all our small savings account that give us 0.05 percent interest? So if you spread your money out into 10 different high interest accounts you will not get an income tax receipt from them if it is below a certain amount.. and you are earning about 3.5 percent interest which is tax free – if you are dishonest, like all of us are.
Also, 5 accounts times 2 at each can work – half of the money is in US dollars and half is in Canadian. Open 5 accounts multiply by two accounts at each bank. (scotia high interest, ing direct USD, ing direct CDN, icici USD, altamira USD, altamira CDN, achieva, bank of montreal high interest account, PC Financial high interest account, and many many more Credit Unions.. throw $2000 in each account and earn small amounts of interest so it is not reported to the CRA).
(this post may self destruct or be deleted by the CRA 2 weeks later)
I have about 80,000 is AIS100, through Investorline, and I am a bit concerned about the recent problems National Bank is having with ABCP. I realize the cash performer isn’t a money market fund, and is CDIC insured, but is there a risk of National Bank going under? Should I sell to avoid the hassel of dealing with CDIC (especially if a lot of other people are doing so)?
Thanks.
(random typing to avoid form problem…,, please ignore this.)
Hi Im a single mother and i just inherited 100K someone told me to put some of the money into a 30 day GIC until I figure out what to do. I have debt in excess of 80k and had planned to open my own business about 50k to start. I lost my job a few months ago so this has been a blessing but I dont know what to do with this money? Pay down my debt or use the money to open my own business. I have an additional 2k in the bank my monthly expenses are 4k currently I have a rental income of $1400 and support of $1800 per month. I am trying to rent another room in my home to decrease my expenses but I am confused. I dont have much savings, any retirement or RESPs for my children. i feel like this is a once in a lifetime oppurtunity and I dont know what to do. pay down my bills, start a business invest the money short term?
Please help?
JGL – are you sure you want to open a business with your financial situation?
I would consider paying off the debt and taking some time to look for a new job.
Mike
TDB164 is the best place to park your money that I’ve found (without fees) @ TD Waterhouse. It is a straight up money market fund with an MER of 0.74%.
There is a T-bill money market (TDB167) which charges a MER of 0.46%, but it seems to yield about 1-2% less than TDB164 anyway, so the 0.25% seems worth it in this case.
[...] fees of any kind are charged for purchasing, selling or redeeming these funds early. I wrote about the Altamira Cash Performer account many years back and the biggest knock then was the steep redemption fees and penalties charged on [...]