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Email this7:23 pm
December 29, 2018
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For those of us that are in the stock market and looking for a «parking spot» for your cash, look into Purpose High Interest Savings ETF (PSA), it's a money market fund backed by four major Canadian banks: National Bank of Canada, Bank of Nova Scotia, CIBC & BMO. It's as secure as a bank but without the CDIC insurance and it has 2.4 billion in assets. It pays 1.65% interest, but if you buy-in at 50.01 and sell at 50.07 every month, it works out to about 3.1%. My entire portfolio is in there, I timely sold every stock & bond and I’m holding while gaining interest. There is a place to hide.
7:33 pm
January 3, 2013
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I timely sold every stock & bond and I’m holding while gaining interest.
Is this really a good strategy? It looks so boring and needs lots of patience but you can always send a buy request for 50.01 and a sell request for 50.07.
You need LOOOTS of $$$ to make this worth the headache. $1M .. 6 cents per share means $1199.xx every trade - trading cost. Let's say $1199. If you can do this 12 times a year, it is a $14397 / year. Putting the money in an EQBank (now 2%) saving account will be equivalent to $20K+ a year in interest on the same $1M.
That's more than $5.5K extra money per year without headache. Not sure if I see the logic and you already said no CDIC coverage.
Considering the occasional offers of 2.3 - 2.8% .. This strategy will look even worse.
EDIT: Sorry I didn't count in the 1.65% interest. Ok. Now it makes sense. Good luck.
7:38 pm
August 10, 2018
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It's as secure as a bank but without the CDIC insurance
I think most people would feel that banks are secure "only" because of CDIC insurance
7:47 pm
December 29, 2018
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No patience needed, just send a limit buy order at 50.01, wait and you will get it. Then, as soon as you get it, send a limit sell order at 50.07 and you will get it also.
Usually, 50.00 is at the beginning of the month (you are lucky if you get 50.00 the ask price) then at the end of the month it can get to 50.09, but occasionally it drops to back to 50.00 from 50.08. So selling at 50.07 is the thing to do, you pocket .06 per share per month + 1.65% interest. Not bad.
It's a good strategy especially if your money is stuck in a registered account, like I am.
8:36 pm
June 3, 2015
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If I recall correctly, someone mentioned that some brokerage's will not let you trade this product...TD comes to mind???
Tangerine....Canada's best bank. LBC.............Canada's 2nd best bank.
Hubert.....worst bank in Canada.
8:44 pm
December 29, 2018
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I guess TD doesn't want to lose business? I'm with Questrade and it’s readily available.
9:13 pm
October 27, 2013
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There are a few brokerages, TDDI and RBCDI, that won't sell this, but besides that, I think the math is flawed. When the price moves to 50.07 or so each month, that IS the accrued interest within the ETF NAV for the month. I believe you can either sell at 50.07 and have a cap gain, or you can collect the interest, not both.
Further, that interest yield is declining, It will float down closer to 1% as the 50bp rate cut works its way into the underlying holdings (of 1-3 month maturities) as they roll over. IOW, pricing will not be going as high as 50.07 just a few months from now.
9:40 pm
December 29, 2018
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AltaRed said
I believe you can either sell at 50.07 and have a cap gain, or you can collect the interest, not both.
Are you sure about that? Their brochure mentions that interest is accrued daily, paid monthly. Maybe I'm wrong?
Therefore, if I sell mid-month, all I get is capital gain. If I keep it for the whole month, they will pay interest. Sounds logical.
9:58 pm
April 6, 2013
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Interest is distributed monthly. One needs to be an ETF unit owner on the record date to received a given monthly interest payment:
| Amount | Ex Dividend | Payment | Record |
| $0.0936 | 2019-10-30 | 2019-11-07 | 2019-10-30 |
| $0.0874 | 2019-11-28 | 2019-12-06 | 2019-11-28 |
| $0.0987 | 2019-12-31 | 2020-01-08 | 2019-12-31 |
| $0.0879 | 2020-01-30 | 2020-02-07 | 2020-01-30 |
| $0.0827 | 2020-02-27 | 2020-03-06 | 2020-02-27 |
If one wishes, for example, to receive the 8.27¢ March 6 interest payment for February, then one needs to be owner of the unit on record on February 27.
10:23 pm
December 29, 2018
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In your example Norm, if I sell, say February 26th, I will not get the interest for that month, just capital gain?
4:26 pm
October 27, 2013
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picassocat said
In your example Norm, if I sell, say February 26th, I will not get the interest for that month, just capital gain?
That is correct. You cannot have both the cap gain and the interest. The price dropped to $50.01 ($50 NAV) on Feb 27th, the ex-dividend date and record date. So you either sell on Feb 26th and get the cap gain, or you sell on Feb 27th at $50 (or later at slowly increasing price) and get the interest in early March.
4:37 pm
December 29, 2018
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Thanks AltaRed !!
4:46 pm
April 6, 2013
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According to TSX Bulletin 2013-033, Purpose High Interest Savings ETF units trade with T+1 day settlement.
So, if one sells on Wednesday February 26, the sale will settle on Thursday, February 27. The buyer will be the owner on the record date February 27 and will be the one entitled to receive the March 6 interest distribution.
Whether or not the seller will end up with a capital gain will depend on the market. If the seller is desperate for cash and there aren't enough buyers, then the seller could end up having to sell below net asset value of $50 plus undistributed interest to get cash.
5:36 pm
October 27, 2013
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PSA doesn't have the same pricing pressure as a normal security. Everyone knows the $50 price gains a cent every 3-4 days due to accrued interest. The market maker, Purpose, makes sure of that by offering, or taking away, ETF units. Trading price isn't going to vary from NAV price by more than a penny, like it did on Feb 27 ($50.01) vs Feb 28 ($50).
Thanks for the example with T+1 day settlement versus my example. I was using settlement day in my example when I should have used transaction day.
6:21 pm
December 29, 2018
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Norman1 said
Interest is distributed monthly. One needs to be an ETF unit owner on the record date to received a given monthly interest payment:
Amount Ex Dividend Payment Record $0.0936 2019-10-30 2019-11-07 2019-10-30 $0.0874 2019-11-28 2019-12-06 2019-11-28 $0.0987 2019-12-31 2020-01-08 2019-12-31 $0.0879 2020-01-30 2020-02-07 2020-01-30 $0.0827 2020-02-27 2020-03-06 2020-02-27 If one wishes, for example, to receive the 8.27¢ March 6 interest payment for February, then one needs to be owner of the unit on record on February 27.
Thanks Norman1 !
Question for you: where can I get the schedule of «record/ex dividend» dates for this fund?
Thank you!
7:09 pm
April 6, 2013
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Product page Purpose High Interest Savings ETF has a table of distributions.
Click "Performance & Distributions" on the page.
8:07 pm
December 29, 2018
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Great, but they don't give out future cut-off dates, which would be nice 
. The earliest seems to be the 27th, so if I sell on the 26th I can eke out a small capital gain + get interest for the days I was «in the fund». Do you have an opinion on this strategy? Worthwhile? Thanks Norman1 !
8:31 pm
December 29, 2018
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I think I have it figured out; my strategy would lose, because the capital gain is offset by the days not in the fund, thereby not gaining interest. Oh well.
1:28 pm
April 6, 2013
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picassocat said
I think I have it figured out; my strategy would lose, because the capital gain is offset by the days not in the fund, thereby not gaining interest. Oh well.
Not sure what you meant by that.
The ETF doesn't work like a regular bank account. There's no adjustment for the number of days the owner has owned the units up to the record date.
The owner on the record date gets the full interest distribution for the month, even if the owner has only owned the unit for that day.
1:42 pm
April 6, 2013
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AltaRed said
PSA doesn't have the same pricing pressure as a normal security. Everyone knows the $50 price gains a cent every 3-4 days due to accrued interest.…
PSA is actually subject to the same pricing pressure. There was substantial pressure around end of June 2018. Spread between the high and low for the day was as high as 6¢ on some days:
Yes, people do know. But, if a seller is desperate, the seller will place a market sell order and take whatever the best bid is.
Something similar happen to Warren Buffet during the 2008 turmoil. For some reason, a desperate buyer bought some US Treasury bills his company was selling for above face value. That would likely guaranteed a loss on maturity when the US government would redeem them for face value.
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