Canadian investors are missing out of up to $500 million a year in yields by sticking with money market funds rather than higher-yielding, insured premium savings accounts, according to a 21-page report from Fair Canada (Foundation for Advancement of Investor Rights).
The report, “Canadian Money Market Funds—Zero Returns,” found that Canadians hold $56 billion in money market funds earning an average of two basis points after costs—and that’s before the impact of inflation and taxes. Further, one-quarter of all Canadian money market funds lost money in the last half of 2009.
“Few individual investors are aware that MMFs are now producing zero or even negative returns, or that many bank savings accounts can produce better returns,” said Ermanno Pascutto, executive director of FAIR Canada. “Investors have a right to know when returns on a safe ‘savings account’-type investment like a MMF fall to zero or turn negative.”
FAIR Canada suggests that fund companies turn honest and tell their investors they would be better off in a CDIC-insured premium savings account paying 75 basis points to 1%.
FAIR Canada estimates that a few Canadians are switching out of money market funds into bank accounts at the rate of about $2 billion a month.
Register or login for access to this item and much more
All Financial Planning content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access