The stock markets are at all-time highs, and while bears like Michael Burry are licking their wounds, the real question is: when will the music stop? If I knew that, I’d be rich. Market timing is a losing game.
The better approach is to identify what’s safe ahead of time and proactively shift a portion of your portfolio into lower-risk assets, rebalancing periodically to systematically sell high and buy low.
The safest places for cash are still guaranteed investment certificates (GICs) and savings accounts, which are CDIC-insured. But certain exchange-traded funds (ETFs) can come close. They may not be covered, but they hold high-quality assets that don’t swing much in value and still pay a reasonable yield, even as interest rates fall. Here are two I like.
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Treasury bill ETFs
Global X 0–3 Month T-Bill ETF (TSX: CBIL) gives you exposure to one of the safest assets in the market: Government of Canada treasury bills. These are backed by the full faith and credit of the federal government and carry an AAA credit rating.
Unlike a GIC, there’s no lock-up, so you can sell CBIL anytime. It trades just like a stock with a bid and ask price. Most brokerages offer CBIL, and it can be owned in a registered account, too.
CBIL pays monthly interest and, as of September 17, yields 2.46% annually after accounting for its 0.11% expense ratio. The price stays very stable, hovering around $50 per share. You’ll see a sawtooth pattern as interest accrues, then drops when it’s paid to you as income.
High-interest savings ETFs
Bank savings accounts offer poor rates for retail customers, but high-interest savings ETFs give you access to institutional-level rates. Global X High Interest Savings ETF (TSX: CASH) is one example.
Instead of T-bills, it places cash in high-interest deposit accounts with one or more Canadian chartered banks. Again, this is done within the ETF wrapper, so expect intra-day liquidity and eligibility for registered accounts.
Right now, CASH yields about 2.55% annually after the same 0.11% expense ratio. The mechanics are similar to CBIL, with the price holding steady and the sawtooth pattern appearing as interest accrues before payouts.
The Foolish takeaway
Both CBIL and CASH are about as safe as ETFs get, but don’t expect them to deliver big returns. I like using them as the low-risk bucket of a portfolio—say a 10% permanent cash cushion.
If that allocation grows because stocks fall, I trim it and buy more equities. If stocks rally and the cushion shrinks, I sell equities and top it back up. This helps me systematically buy low and sell high.
Over time, this approach can help you stick to your plan without overthinking short-term moves. Just don’t use CBIL or CASH as market-timing tools, and don’t expect them to carry you to retirement on their own.
