What is CASH.to?

Interest rates have shifted dramatically in recent times, transforming how Canadians approach fixed income investments. After years of historically low rates, the Bank of Canada’s rapid increases have made products like high-interest savings accounts and ETFs attractive options once again.

With competition being tough, many consumers would chase the highest interest rates, but that often required you to constantly switch banks. To combat this issue, horizons introduced CASH.to, a High Interest Savings exchange-traded fund (ETF). When looking at the yields, it’s obvious that CASH.to is a great choice for those looking to invest in fixed income. But what is CASH.to, is it safe, and how do you buy CASH.to? I’ve got all the answers in this CASH.to guide.

Understanding CASH.to?

CASH.to represents the ticker symbol for the Horizons High Interest Savings ETF listed on the Toronto Stock Exchange. The “.to” extension indicates that it trades on Canada’s main stock exchange.

This exchange-traded fund focuses on generating monthly income for investors by allocating assets into high-interest deposit accounts held with Canadian chartered banks. The fund’s primary goal centres on maximizing your monthly distributions while maintaining capital preservation and liquidity.

When you invest in CASH.to, you gain exposure to Canadian dollar-denominated cash-equivalent investments without needing to manage multiple bank accounts yourself. The ETF operates as a convenient vehicle for parking cash while earning competitive interest rates that often exceed traditional savings accounts.

How Does CASH.to Work?

When you invest in CASH.to, your funds are pooled with other investors’ money and placed into high-interest savings accounts at major Canadian financial institutions. The fund manager actively seeks out accounts offering the strongest returns and can shift money between institutions to maximize yields.

This pooling strategy provides a significant advantage. Because CASH.to manages billions of dollars in assets, it can negotiate better rates than individual investors typically access on their own.

Key operational features:

• Monthly distributions are paid directly to your brokerage account
• You must hold shares by the ex-dividend date to receive that month’s payment
• The fund continuously reallocates capital to maintain optimal yields
• Returns reflect the aggregated performance of multiple high-interest accounts

The mechanics mirror those of a standard savings account, where you deposit money and receive interest payments. The main difference is that CASH.to leverages institutional scale to secure enhanced rates for investors.

How do CASH.to Yields Work?

CASH.TO generates returns based on interest earned from deposits held at Canadian financial institutions. The fund’s performance fluctuates with prevailing interest rates. During 2021’s historically low rate environment, yields hovered around 0.6%. Current interest rates have pushed yields into the 3.5% to 4.5% range.

These rates typically exceed what you can access by opening accounts directly with banks. The quoted yields represent annual figures. You receive distributions monthly, calculated as roughly one-twelfth of the annual rate.

The fund charges a management expense ratio of 0.11%. This fee is deducted before your yield is calculated and posted, meaning the rate you see already accounts for costs. You don’t need to subtract anything additional to determine your actual return.

Your distributions arrive as monthly deposits into your brokerage account if you hold shares by the ex-dividend date. This structure mirrors traditional savings accounts but operates through the exchange-traded fund framework.

How Does the Share Price of CASH.to Function?

The share price of CASH.to operates on a predictable cycle tied to its monthly distributions. The ETF maintains a floor net asset value of $50, which means the trading price stays at or above this baseline.

Throughout each month, the share price gradually increases as the fund accrues interest income. This daily appreciation continues until the distribution payment date arrives. On the ex-dividend date, the share price typically reaches its monthly peak before resetting to the $50 minimum after the distribution is paid out.

Key pricing mechanics:

• The price climbs each trading day incrementally
• The increase reflects the accumulating distribution value
• The share price drops back to $50 after the payout

This structure means that the timing of your purchase makes little difference to your returns. When you buy at a higher price mid-month, you’re paying for the upcoming distribution that’s already embedded in the cost. The distribution you receive offsets the elevated purchase price, resulting in a neutral timing effect for investors.

How Are You Taxed on CASH.to?

When you hold CASH.to in a non-registered account, you’ll pay tax on the monthly distributions as interest income. This interest gets added directly to your total income for the year and taxed at your marginal tax rate.

If you sell your CASH.to shares for more than you paid, you’ll trigger a capital gain. The tax treatment works like this: only 50% of your capital gain is added to your taxable income. For example, if you sell shares and realize a $100 profit, you’ll include $50 in your taxable income, which is then taxed according to your marginal rate.

Registered accounts work differently:

• RRSP
• TFSA
• LIRA
• RESP

When you hold CASH.to in any of these registered accounts, you don’t need to track interest or capital gains. You won’t owe any tax on distributions or price appreciation within these accounts.

How to buy CASH.to?

You can buy CASH.to via your broker or your online discount brokerage account. CASH.to can be held in all registered and non-registered investment accounts.

CASH.to is eligible for placement in registered accounts such as TFSAs and RRSPs, as well as non-registered investment accounts. Your brokerage may charge a commission for executing the trade, though many platforms now offer commission-free ETF purchases.

Important limitation: Certain financial institutions restrict access to this ETF. TD Direct Investing currently blocks clients from purchasing CASH.to, which appears to be a business decision rather than a regulatory restriction.

Before placing your order, verify that your brokerage permits CASH.to transactions. If your current platform doesn’t support it, you may need to transfer funds to a different brokerage that allows High Interest Savings ETF purchases.

CASH.to vs. GICs

CASH.to and GICs represent two distinct approaches to cash management in Canada. GICs are fixed-term products offered by banks and trust companies that lock in a specific rate of return for a predetermined period.

The yield structure differs significantly between these options. A GIC provides a fixed interest rate that remains constant throughout its term, whether that’s one year or longer. CASH.to distributes monthly dividends that fluctuate based on prevailing market conditions and short-term interest rates.

Liquidity is another key distinction. GICs typically require you to commit your funds for the entire term, restricting access until maturity. You can trade CASH.to shares during Toronto Stock Exchange hours, providing the ability to access your capital when needed.

Protection and costs also vary. Eligible GICs qualify for CDIC coverage up to $100,000, safeguarding your principal. CASH.to does not carry this insurance protection. Additionally, CASH.to charges management fees that reduce your net returns, while GICs have no associated fees.

Overall, CASH.to gives you more flexibility than GICs since you can withdraw your funds at any time. However, you need to pay fees for CASH.to and there’s no CDIC insurance.

Comparing CASH.to with Other Options

Besides GICs, there are a few other alternatives to CASH.to that are worth considering:

High Interest Saving Accounts

ou can bypass CASH.to entirely by placing funds directly into a high-yield savings account. The returns from CASH.to typically exceed what most banks offer on standard deposit accounts.

Higher rates may be available through promotional offers for new deposits, but this requires effort on your part to transfer money between institutions and open multiple accounts. A key benefit of direct deposits is CDIC protection, which covers your money if you open an eligible account with a member institution of the Canadian Deposit Insurance Corporation.

CASH.to does not provide CDIC coverage, making direct savings accounts more secure for those prioritizing capital protection.

Money market funds

Money market funds are funds that invest in short-term bonds. They typically invest in bonds that have a maturity of less than 30 or 60 days so their yield can follow the interest rate movements. This can be a decent alternative to CASH.to, but investors should look at the quality of all bonds within the funds to make sure they match their risk profile.

What Happens to CASH.to if Interest Rates Drop?

When interest rates decline, your CASH.to distributions will decrease accordingly. The fund generates returns by depositing cash into Canadian bank accounts, and these earnings fluctuate with prevailing interest rates.

Your monthly payouts will shrink as the fund earns less on its holdings. During periods of historically low rates, distributions can fall significantly—potentially to levels similar to 2021 when yields hovered around 0.6%.

Key impacts on your investment:

• Lower monthly distributions
• Reduced annual yield percentage
• Decreased passive income generation

The fund’s performance remains directly tied to what Canadian banks pay for deposits. You won’t receive fixed returns, as the yield adjusts continuously based on market conditions.

Is CASH.to Safe?

CASH.to does not carry CDIC insurance, which distinguishes it from GICs or traditional high-interest savings accounts. This lack of insurance coverage applies to all ETFs, stocks, preferred shares, and bonds, not just CASH.to specifically.

The ETF deposits funds into accounts at major Canadian financial institutions, including National Bank, Scotiabank, and CIBC. Canadian banks rank among the most secure financial institutions globally, which provides a degree of safety for your investment.

While you cannot consider CASH.to 100% safe due to the absence of CDIC protection, the risk remains relatively low. If one of Canada’s major banks were to collapse, the resulting economic crisis would likely overshadow concerns about individual deposit losses.

Key Safety Considerations:

• No CDIC insurance coverage
• Funds held at multiple established Canadian banks
• Canadian banking system has strong stability record
• Risk comparable to other ETF investments

Your money faces minimal risk under normal economic conditions, though you should understand the differences between ETF holdings and insured deposit accounts.

Final Thoughts

CASH.TO stands out as a practical choice for parking funds you want to keep accessible. You won’t be locked into your capital for months or years, as you would with fixed-term products. The ability to trade during market hours gives you flexibility that traditional savings products can’t match.

You can hold this ETF in your TFSA, RRSP, or any other account type you already have. This means you won’t need to open additional accounts or juggle multiple institutions. The competitive interest distribution makes it worth considering, though you should weigh the absence of CDIC coverage against your own risk tolerance and financial goals.

The popularity of this fund reflects its usefulness for investors seeking liquidity combined with reasonable returns on cash holdings.