When to sell CASH.TO? | General financial discussion | Discussion forum

Max said
I need money to pay for company income taxes by the 30th of June but will receive a paycheck on the 9th of July.

If I sell cash.to etf on the 27th of June and had it invested since the 1st of June, do I lose the interest for all the month or just the last 4 days?  

It is too late already but anyway short answer is only 4 days. Unlike mutual funds, it trades in market with any price but it trades very closely (mostly less than 1cent) to the NAV and accrued interest is reflected in NAV everyday.

Max said

If I sell cash.to etf on the 27th of June and had it invested since the 1st of June, do I lose the interest for all the month or just the last 4 days?

According to the TMX Money quote page for CASH, the ex-dividend date for the July 8 distribution of 19¢ is June 28.

If one sells on June 27, then the sale is cum-dividend, includes the right to the July 8 distribution. Consequently, seller will not receive any of 19¢ distribution from the ETF.

The hope is that the buyer will pay a higher price to share some of the 19¢ the buyer will receive on July 8. Just like a home buyer will pay a bit more when the home seller has paid the property taxes for the year to the city and the sale closes later the same year.

These Cash ETFS daily market price reflect the accrued interest throughout the month until ex-distribution date with the accrued interest being a capital gain if ETF units are sold at FMV greater than $50.

Go to https://money.tmx.com/en/quote/CASH and select 3 months to see how that works. Nothing is lost if sold before the ex-distribution date. One gets accrued interest as cap gains.

Agreed for the reasons you say but the trend is still clear from the chart I linked.

One should not be buying Cash ETFs if one is counting on their accrued interest each day. Own an ISA or a MMF instead where daily accrued interest is a 'certainty'.

Yes, there is always opportunity on something like CASH.TO but I don't know of many (any in real life) folk who would spend their time hovering over their monitor to potentially capture 2-4 cents cap gains around ex-dividend date. For those that do, and have zero trading commissions, and don't have a better way to spend their time, kudos to them. I think for most of us, these vehicles are only places to get yield on cash equivalent emergency/trading funds.

I generally stick with ISAs like BMT104 and DYN6004, albeit I did swap out BMT104 for BMO95142 mid-June after BMO dropped BMT104 yield by 25bp, at least for now while money market funds with duration of 30-90 days lag the ISAs in downward trends in yields. The delta will approach zero in another 30 days or so, unless there is another BoC interest rate drop on the 25th of this month.

Added: From https://bmofundcentral.com/fund/68033978/#under-the-hood BMO95142 Current Yield as of June 28th has already dropped to 4.79% from about 4.95% a month ago.

CASH.TO gross yield as of June 20 was 4.68% with net yield of 4.57%, albeit in cap gains format if traded just before ex-dividend date. I think one would have to be playing with >$500k to make this a worthwhile effort.

Fritz23 said
Is BMO95142 an ISA or a MMF with monthly dividends? How and where could I buy BMO95142?

Thanks,  

It is a MMF with monthly distributions, usually re-invested back into more units. You will have to check whether your brokeage lists it for purchase. Obviously a mutual fund sales person can sell it to you at BMO branches but otherwise it would be through a brokerage account.

BMO95142 is accepted, at least, by Scotia iTRADE's mutual fund order page.

BMO95142 is the series F units of the BMO Money Market Fund, with 0.13% MER and 4.84% current yield. Not likely it would be available through the mutual fund sellers in a BMO branch; there isn't room in the MER for a trailer commission.

Instead, BMO142, the series A units of the same fund, would be offered in a BMO branch with a higher 0.75% MER and lower 4.25% current yield.

Money market mutual funds, like BMO142 and BMO95142, are handled through mutual fund bookkeeping systems that can handle fractional units.

Additional units, whole and fractional, are issued for reinvested distributions. There is no reverse split of the units afterwards to keep the number of units the same; there is no need to avoid fractional units as there would be with exchange traded fund units like ZST.L.

Fritz23 said
Thanks, Norman1. In this regard BMO142 and BMO95142 or working like ISAs?  

To the retail customer, they are more similar than dissimilar in that both are bought and sold through the mutual fund system and both accrue interest daily and pay monthly, generally via re-investment into more units than cash as selected by the ISA/MMF holder. Most are priced at $10/unit but many are priced at $1/unit (anecdotally BMO and BNS seem to do more of the latter).