When it comes to managing your finances, having liquid assets at your disposal can be a lifesaver during unexpected financial challenges. In this article, we’ll explore some of the best liquid investment options available to Canadians in September 2023.
High-Interest Savings Accounts, commonly known as HISAs, have gained popularity in recent years due to rising interest rates and increased volatility in other investment avenues. HISAs are essentially savings accounts that offer a higher interest rate than standard savings accounts. The interest rates on HISAs in Canada can range from 1% to over 5% APY, making them attractive for risk-averse investors who prioritize liquidity.
While traditional chequing accounts often offer minimal interest, some smaller banks in Canada now provide chequing accounts with more competitive interest rates. These accounts offer the flexibility of a regular chequing account while providing a slightly higher interest rate than standard HISAs.
Redeemable GICs provide a low-risk, liquid investment option. Similar to lending money to a financial institution, you receive guaranteed interest payments on your investment. You can redeem these GICs without penalty, making them more liquid than regular GICs. Short-term GICs are also available in 3, 6, and 9-month increments.
Money market funds are mutual funds that primarily invest in short-term, highly liquid debt instruments, such as treasury bills and government securities. They offer liquidity and safety, but it’s essential to be aware of the management expense ratio (MER) associated with these funds.
Cash ETFs and HISA ETFs are traded on stock exchanges and offer a way to earn higher interest rates while avoiding high MER fees associated with traditional mutual funds. These ETFs are highly liquid and have no minimum balance requirements.
While stocks are generally considered riskier than other liquid investments, they offer substantial potential returns. Stocks can be sold quickly, providing immediate access to funds. However, they require a brokerage account and may involve commission fees.
ETFs have gained popularity due to their liquidity and diversification benefits. They trade like stocks but provide a higher level of safety, as they are less impacted by daily market volatility. However, ETFs come with their own MERs.
Mutual funds are managed portfolios offered by financial institutions, providing exposure to various assets like stocks or bonds. They charge MERs but offer distributions that can be reinvested. There are thousands of mutual funds available in Canada.
Bonds are fixed-income assets that pay guaranteed interest distributions. They are similar to GICs but have some potential for price fluctuations based on interest rate changes. Bonds are relatively low-risk investments.
Liquid investments can be quickly converted to cash when needed. While some assets, like stocks, can only be sold during market hours, liquid investments are generally considered secure because they are intended for short-term use.
Selecting the right liquid investment depends on factors such as your financial goals, risk tolerance, liquidity needs, time horizon, costs, and potential returns. Liquidity and time horizon are crucial considerations when choosing liquid investments.
The advantages of liquid investments include immediate access to funds and stability. However, they often offer lower returns compared to less liquid options. Additionally, brokerage fees may apply when liquidating assets like stocks or ETFs.
Some investments, such as private equity, collectibles, precious metals, real estate, hedge funds, stock options, jewelry, and antiques, offer limited liquidity and may require finding specific buyers or waiting for redemption dates.
