Mortgage fund or money market fund?
Over a year ago you recommended switching the cash in money market funds to mortgage funds. Are you still recommending this or should we be placing our loose cash somewhere else? – P.O’D.
Gordon answers: Your question is very timely. This strategy worked very well for us over the past year. The average mortgage fund returned 4.6 per cent over the 12 months to April 30, while the average Canadian money market fund gained only 1.9 per cent.
But now it is time to change gears. Mortgage funds are higher risk than before, given the expected rise in short-term rates. Therefore, money market funds are a safer bet for capital preservation at present and the yields should increase over the next year as rates rise. – G.P.