Q&A With Gordon Pape: Money Market Fund or High-Interest Savings Account?

This 80-something reader asks Gordon Pape where he should invest the cash in his portfolio – a money market fund or a high-interest savings account.

Q – I am 87 years old and concerned about market volatility. Right now, 20 per cent of my portfolio is in cash (approximately $176,000). I am considering investing in money market funds or utilities. I would appreciate your advice between these or other sectors. If you feel money market funds are the answer, please advise one. – Art B.

A – I like utility stocks right now. They were beaten down when interest rates were rising but have staged a recovery recently. Despite the rebound, they still offer attractive yields. But there is more short-term risk in placing your money in utility stocks compared to money market funds or high-interest savings accounts.

Money market funds do not look very attractive at this stage. Most have a one-year return of less than 1 per cent. You can do much better with a high-interest savings account. EQ Bank is currently offering 2.3 per cent on deposits. It is a member of the Canada Deposit Insurance Corp. (CDIC), which protects your assets up to $100,000.

Some financial institutions are offering even higher returns although in some cases it may be an introductory offer that has a limited time frame, so check carefully. Go to ratehub.ca for a list of high-interest savings accounts and special deals. – G.P.

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