Money funds still not recommended

Last year at this time, I suggested that you avoid money funds entirely because interest rates were so low. My advice was to use mortgage funds or short-term bond funds instead for your cash holding. If you followed that suggestion, you came out ahead. The average Canadian money market fund gained just 1.5% in the year to Nov. 30. During the same period, the average Canadian short-term bond fund added 2.6% and the average mortgage fund gained 3.5%.

I see no reason to change this recommendation for 2003. However, keep an eye on interest rates. If they start to rise, shift from the short-term bond or mortgage fund into a money market fund to protect your asset base. If you do decide on a money fund, choose one that has no load charges and a low MER. Altamira T-Bill Fund is always a good selection.

Adapted from an article that originally appeared in Mutual Funds Update, a monthly electronic newsletter of common sense mutual fund advice edited by Gordon Pape. To take advantage of a three-month trial subscription available to uss for just $9.97 plus tax!