Smart money management means putting any extra money you have after paying your bills into investments. If you want to grow your investments quickly, try saving and contributing more to make use of your Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP).
When deciding what to invest in, prioritize your risk tolerance. In simple terms, consider how many ups and downs or losses you can handle without getting scared and selling everything. It’s better to invest conservatively and steadily than to recklessly abandon ship at the first sign of market volatility.
Today, let’s talk about two exchange-traded fund, or ETF, options that are good for both careful or bold investors. One gives you safety and decent income, while the other has the potential for big growth. Both offer low costs and simplicity, which makes them great for a $10,000 lump sum investment.
CI High Interest Savings ETF
CI High Interest Savings ETF (TSX: CSAV) is an excellent choice for keeping your money secure in a brokerage account while earning a competitive yield. Unlike Guaranteed Investment Certificates (GICs), CSAV doesn’t lock your investment up, so you can access your money at any time.
In addition, CSAV has almost no market risk, as the ETF holds its funds in deposits within high-interest savings accounts at various Schedule 1 Canadian banks. In the event of a market crash, CSAV won’t lose value, since it isn’t tied to stocks or bonds — its assets are 100% cash deposits.
At present, CSAV offers an annualized gross yield of 4.91%. If the Bank of Canada raises interest rates further, the yield on CSAV will increase accordingly. As for fees, CSAV charges a management expense ratio of 0.16%. For a $10,000 investment, that’s about $16 in annual fees.
BMO S&P 500 ETF
For risk-tolerant investors seeking a high-growth option, BMO S&P 500 ETF (TSX: ZSP) is a great choice. This ETF tracks the well-known S&P 500 Index, which has been historically difficult to beat over the long run, providing an annualized return of around 10% since 1957 with dividends reinvested.
In terms of fees, ZSP charges a management expense ratio of 0.09%. For a $10,000 investment in ZSP, you can expect to pay around $9 in fees annually. This is a rock-bottom fee that is many times smaller than competing mutual funds that will likely underperform the S&P 500 index.
However, keep in mind that ZSP is not currency hedged. Because its underlying stocks trade in U.S. dollars, fluctuations in exchange rates can help or hurt your returns. If the U.S. dollar appreciates, ZSP will gain additional value and vice-versa if the U.S. dollar depreciates.
