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hi
a member of our family will receive a lump sum payout from their job. the money will in six months be needed for living expenses, (no more salary, you see)

Where is the best to park 50k for six months?. Just looking for something that bears interest without the value of the capital changing.

high interest savings account pay almost nothing, the best I could find that wasn't a teaser rate was 1/4 of one percent from tangerine.

I see that RBC has a money market fund but I couldn't tell if when you put in $1 you will get back $1. ie. if the share price fluctuates with interest rates.

Any suggestions would be most appreciated!
Thanks,
JP
 

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Where is the best to park 50k for six months?. Just looking for something that bears interest without the value of the capital changing.
To guarantee your capital, I would say that an HISA at one of the independents would be best (EQ Bank, Oaken, etc).

You could get a 6 month GIC, but the rates are pretty low.

I see that RBC has a money market fund but I couldn't tell if when you put in $1 you will get back $1. ie. if the share price fluctuates with interest rates.
No, the money market funds guarantee capital. The rate can change any time, just like an HISA.

ltr
 

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Discussion Starter #3
To guarantee your capital, I would say that an HISA at one of the independents would be best (EQ Bank, Oaken, etc).

You could get a 6 month GIC, but the rates are pretty low.



No, the money market funds guarantee capital. The rate can change any time, just like an HISA.

ltr
ok! thanks very much!!!!
 

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Yes a high interest savings account is what you need.

There's a really good looking one on the Tangerine.ca home page. 2.50% interest for 5 months if it's your first savings account with them. Tangerine is a division of Scotia which makes this even more attractive (pretty darn safe).

Assuming you don't already have an account with them, I'd go with that 2.50%. I don't think you will find any better.
 

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I was also going to suggest the Tangerine promo for new accounts (although I thought it had a hard stop at Oct. 31 rather than "first 5 months").
 

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I see everybody asking for a "low-risk" investment and answers are all "HISA".

I personally think there's a difference between "low risk" and "no risk". HISA is a no-risk investment for your capital, but there are other investments which are low risk with higher returns. For example, ZGQ.TO never had more than 7 months underwater drawdown in 5 years, including COVID. It doesn't mean it won't happen though so I wouldn't suggest, but I'm pretty sure one could screen for low-risk investments that never had more than 3 months underwater in the last 10-15 years with a 1-year rolling return better than HISA and put money there for 6 months and sleep well at night.

But I get that most people's definition of a "low-risk, short-term" investment is basically a no-risk investment for capital, so yes, I guess the best answer is HISA.
 

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there are other investments which are low risk with higher returns. For example, ZGQ.TO never had more than 7 months underwater drawdown in 5 years.
...
But I get that most people's definition of a "low-risk, short-term" investment is basically a no-risk investment for capital, so yes, I guess the best answer is HISA.
I think that when most people say low risk, they mean that they won't see the value plummet. ZGQ (like all stocks) fell as much as 29% just a couple months ago.
 

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First, this is not an advice on investing into ZGQ for this discussion, it's just an example.

There's something important to notice.

Say you plan on investing and you need that money in 6 months and you invest in ZGQ on February 20. Now, yes from the peak on February 20 until the bottom on March 23, money invested lost -24%. But that's one month. In fact, starting on July, you've break even in 4 months are you are currently at +2.6% as of today, so you're good and you can sell everything if you are scared since you need that money in 1 month (since you invested it on February 20, then 6 months later is August 20).

Let's take another example. You need that money on March 23, 2020, which is 6 months after September 23, 2019. We are currently on September 23, 2019 and you invest your money. Well, to your eyes, you have not lost -24% of your investment as of March 23, you are at -11% of the money you invested back on September 23, 2019. Not only that, but 3 days later you break even on March 26 and on March 30, you are at +1.4% on the money invested back on September 23, 2019.

Now, I repeat, I don't suggest to invest into ZGQ when your deadline is in 6 months, it's just an example. I'm just showing that when you have higher returns, lower volatility, a drawdown of 3 months may not be that scary for an investment of 6 months.

Though, I totally agree that if you have no plan B and that you will need all of that money at a specific point in time, then it should be in a HISA or a GIC unless your horizon is counted in decades (or in years if you are confident of your investment skills and of the future of the stock market).

That being said, I'm a contrarian and I've personally invested a big chunk of money that I planned on needing 5 months later... I'm reckless, but so far, so good, it stayed in the green zone all the way and I have a plan B to balance any possible loss.
 

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Now, I repeat, I don't suggest to invest into ZGQ when your deadline is in 6 months, it's just an example. I'm just showing that when you have higher returns, lower volatility, a drawdown of 3 months may not be that scary for an investment of 6 months.
I agree that recovery time is an important consideration. But stocks don't always recover this fast from big drops. Based on the history of stock performance, a recovery period of 10 to 15 years is also possible.

That's why I'm not impressed at all by the recent 3 month drawdown. Yes this was a very fast bounce & recovery but it's not always like that.
 

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I agree that recovery time is an important consideration. But stocks don't always recover this fast from big drops. Based on the history of stock performance, a recovery period of 10 to 15 years is also possible.

That's why I'm not impressed at all by the recent 3 month drawdown. Yes this was a very fast bounce & recovery but it's not always like that.
Yes, that's true. That's why we must be cautious with one-time investments as opposed to cash flow investment. Investing 108 000$ into QQQ on year 2000 leads to a final balance of 36 000$ at the end of year 2008. Meanwhile, investing 1000$ every month (same total amount of money) leads to a final balance of 95 000$.

Or even investing through 3 years of bear market isn't that bad with cash flow as opposed to one-time investment. Investing 36 000$ into QQQ on year 2000 leads to a final balance of 10 000$ at the end of year 2002. Meanwhile, investing 1000$ every month (same total amount of money) leads to a final balance of 23 000$. And also, when investing cash flow into a bear market, at some point one may decide to stop the cash flow, watch the bear market continue and wait for a sign of a bull market, therefore losing even less money.

The other way around is also true with the bull market, though. Investing 108 000$ into QQQ on year 2009 leads to a final balance of 621 000$ at the end of year 2017. Meanwhile, investing 1000$ every month (same total amount of money) leads to a final balance of 286 000$.

That's just pure logic, but some people don't know that. Winning a 500 000$ lottery, then investing all in the market and then watching it being consumed by a sudden bear market. As always, high risk high reward/loss, low risk low reward/loss.
 
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