CASH.TO vs PSA: Exploring Low-Risk Cash Alternatives

The main difference between CASH.TO and PSA is in the composition of both ETFs wherein PSA offers slightly more diversification amongst a larger number of Canadian banks.

Furthermore, CASH.TO is an ETF managed by Horizons ETFs while PSA is managed by Purpose Investments.

In this article, we will compare two specific ETFs – CASH.TO and PSA – in terms of their features, benefits, and performance.

The two offer certain similarities, Most importantly, they both invest in high-interest deposit accounts of Canadian banks to provide monthly distribution income.

However, there are some key differences to keep in mind as well.  

We’ll evaluate which ETF is better suited for your unique high-interest savings goals and by the end of this article, readers will have a comprehensive understanding of the CASH.TO ETF and PSA ETF, enabling them to make informed decisions based on their investment objectives and preferences.

Overview of the CASH.TO ETF

The CASH.TO ETF is a Canadian exchange-traded fund that aims to maximize savings during high interest rate environments.

It invests in low-risk assets, namely the deposit accounts of the large Canadian banks. 

Traditional savings accounts at banks have comparatively lower yields.

Higher-yielding instruments such as GICs have lock-up periods where investors cannot access their funds.

CASH.TO offers the best of both worlds by offering a yield that is comparable to high-yielding instruments while offering strong liquidity through trading availability on a stock exchange.

The fund’s primary goal is to offer investors a low-volatility investment option that ensures stable income and capital preservation.

The fund achieves this objective by generating interest income for investors, which is then distributed as monthly dividends per share. 

As such, the ETF is best used by people looking to park their excess savings into a low-risk fund or save towards the purchase of an asset or discretionary item (such as a vacation). 

Performance and Returns of CASH.TO

When evaluating the performance and returns of CASH.TO, it is important to consider key metrics and historical data.

CASH.TO consistently delivers strong returns with an average annual gross yield of 4.92% as of March 15, 2024.

The fund provides investors with a steady and reliable passive income stream through monthly dividends.

Annualized distribution yield as of March 28, 2024 was 4.68%.

Effectively this means that all earned interest is paid out as shareholder dividends.

CASH.TO also has a low management expense ratio of 0.11%, ensuring that a greater percentage of the fund’s returns goes to investors.

This makes it a cost-effective option for individuals looking to invest.

Benefits of investing in CASH.TO

The benefits of investing in CASH.TO are plentiful.

Primarily, it provides a convenient way to earn interest on cash accounts and offers high liquidity on the Toronto Stock Exchange with a last 12-month average of 1,142,659 units exchanging hands daily (as of March 22, 2024).

Investing in the ETF also offers the advantage of generating income through regular distributions, which can serve as a valuable source of passive income.

Investors can achieve diversification by gaining access to a diverse portfolio of high interest savings accounts, including:

  • National Bank Cash Account (47.23%)
  • Scotiabank Cash Account (26.88%)
  • CIBC Cash Account (25.87%)
  • Cash (0.02%)

As of March 22, 2024

This broad allocation of investments across multiple accounts and financial institutions helps mitigate risk. 

Risks of investing in CASH.TO

Despite all these benefits, CASH.TO, like any investment, carries risks.

Market fluctuations and changes in interest rates can impact its performance.

Additionally, there is an opportunity cost of investing in CASH.TO versus potentially higher-yielding savings accounts or ETFs, including the PSA as listed below.

The CDIC also only insures deposits held by member institutions up to a maximum of $100,000.

Since funds in the CASH.TO ETF are technically not classified as member institution deposits, ETF holders would not receive insurance coverage in the rare case that any of the banks fail. 

Overview of PSA ETF

PSA ETF, also known as Purpose High Interest Savings Fund, is an exchange-traded fund that aims to provide investors with high-interest income.

It is a low-risk investment option for individuals seeking stable returns.

The PSA ETF invests in a diverse portfolio of high-quality, high-interest deposit accounts offered by the large Canadian banks.

These investments not only offer a stable income stream from monthly distributions, but also minimize capital loss.

The PSA ETF is listed on the Toronto Stock Exchange (TSX), allowing investors to buy and sell shares on the secondary market.

Typically, investors of the PSA would be those that are seeking to diversify their portfolio of conventional assets such as stocks and bonds.

Additionally, it could also be used by people saving up towards making a purchase such as a home, car or vacation.

Performance and Returns of PSA ETF

The PSA ETF offers stable returns over time with low volatility.

Gross yield of PSA was 5.06% and net yield was 4.90% as of March 25, 2024.

This makes it an attractive option for risk-conscious investors. 

Benefits of investing in PSA ETF

Offering the benefits of stability and monthly distributions, the PSA ETF is an ideal way to obtain returns on savings that you would otherwise hold in traditional bank savings or chequing accounts.

It provides a convenient way to earn interest on cash accounts and is well-traded on the Toronto Stock Exchange with an average daily volume of 111,885 units as of March 25, 2024.

Investors can also diversify away from assets correlated with broader market performance towards lower-risk securities. PSA’s composition is as follows:

  • National Bank Cash Account (49.56%)
  • Canadian Treasury Bill (39.87%)
  • Scotiabank Cash Account (10.54%)
  • Cash (0.03%)

As of March 25, 2024

Risks of investing in PSA ETF

Similar to the risks of the CASH.TO ETF, PSA ETF’s performance is also contingent on central bank decisions on interest rates.

A reduction in rates will correspond to lower yields earned on your savings. 

Additionally, it is also worth noting that unlike your money in savings accounts deposited directly at banks, any funds held in ETFs such as PSA are not insured by the CDIC in the rare case where one or more of the underlying banks turn insolvent.

Comparison: Purpose High Interest Savings ETF vs CASH.TO

When comparing the CASH.TO ETF and PSA ETF, there are many similarities given the overlap in their investment coverage and focus on capital preservation.

However, there are also some important differences that are worth keeping in mind. 


Major similarities are as follows: 

1. Mandate

Both ETFs provide investors with high-interest savings and passive income opportunities via monthly distributions.

As a result, they are best used by people who are either diversifying or de-risking their investment portfolio or saving up for a purchase.

2. Administration

Both ETFs are managed and administered by highly reputable Canadian financial institutions.

CASH.TO is owned by Horizons ETFs Management (Canada) Inc. which is Canada’s 4th largest ETF provider and a subsidiary of Mirae Asset Management, a large global asset manager. 

PSA is managed by Purpose Investments Inc., a division of Purpose Financial which has 51 ETFs that are currently traded on the TSX and NEO exchanges.

3. Liquidity

Investors can purchase both CASH.TO and PSA on the Toronto Stock Exchange, making them accessible to a wide range of Canadian investors.

Differences between CASH.TO and PSA ETF

Here are the key differences to consider:

1. Allocation

While both ETFs invest in Canadian banks, the percentage allocations held in each bank’s deposit account differ.

In addition, the PSA ETF also includes exposure to BMO’s high-interest deposit account over and above the accounts offered by CASH.TO.

2. Management Expense Ratio

CASH.TO has a lower management expense ratio of 0.11% while PSA’s MER is 0.16%.

3. Returns:

The gross yield of both CASH.TO and PSA will vary and while generally very close, it’s important to pay attention to the returns offered.

Which ETF is better for high interest savings?

When it comes to high interest savings, it is worth considering both the CASH.TO and PSA ETFs.

Factors to consider when choosing between the two are:

  • Historical performance: Compare net yields and trailing returns to determine which ETF consistently performs better for high-interest savings.
  • Net asset value (NAV): A higher NAV indicates a stronger investment portfolio, making it a better option for high interest savings.
  • Management expense ratio (MER): Lower MERs can significantly impact overall returns over time and make it a better choice for high interest savings.

Final thoughts

Both the CASH.TO ETF and PSA ETF offer unique benefits for investors seeking capital preservation and modest monthly income.

When evaluating these ETFs for your portfolio, it is important to consider your investment goals and risk tolerance.

By carefully evaluating your investment goals and considering the unique features of each ETF, you can make an informed decision that aligns with your financial objectives.

For more information on each ETF, check out their fund factsheet available on the Horizons and Purpose websites.

Guy on computer and phone looking at ETF charts

Frequently asked questions

  • What are some individual companies available to Canadian investors looking to invest in high-interest savings ETFs?
  • Why is the dividend per share higher for PSA.TO despite its lower yield percentage?
  • The dividend per share for PSA.TO may be higher due to factors such as the number of shares held and the timing of dividend payments. The yield percentage only represents the annual return based on the current market price, while the dividend per share is a more specific measure of the actual dividend received per share.

  • What are the differences between high-interest savings ETFs and GICs?
  • The main differences between high-interest savings ETFs and Guaranteed Investment Certificates (GICs) are liquidity and CDIC insurance. High-interest savings ETFs offer liquidity, meaning investors can buy and sell shares on the stock market, while GICs have a fixed term and may not be easily accessible before maturity. However, GICs are typically insured by the Canada Deposit Insurance Corporation (CDIC), protecting the principal investment up to certain limits, while high-interest savings ETFs are not.

  • Which high-interest savings account ETFs are recommended in Canada?
  • Some of the recommended high-interest savings account ETFs in Canada are Horizons Cash Maximizer ETF, Horizons High-Interest Savings ETF, Purpose High-Interest Savings Fund, CI High-Interest Savings ETF, and Horizons USD Cash Maximizer ETF.

  • What factors should investors consider when choosing a money market ETF?
  • When choosing a money market ETF, investors should consider factors such as the management expense ratio (MER), size of the ETF, gross and net yields, and historical performance. A lower MER indicates lower fees, while a larger ETF size may offer better liquidity. The yields can help determine the potential return on investment, and historical performance can provide insights into the ETF’s past performance.

Harshil Dhanky

Harshil Dhanky is a financial services professional based out of Toronto, Ontario with extensive experience in the Canadian banking industry across Toronto, Calgary, and Vancouver in the capital markets, asset management, and lending sectors.

In the past, Harshil has worked with a range of consumer lending websites, personal finance advisors, investment managers, insurance companies, and other financial institutions to write and edit whitepapers, articles, blog posts, and other collateral read by consumer audiences to help them make better financial decisions.

His work spans a wide range of Canadian personal finance topics including savings and retirement programs, debt management tips, mortgages and personal loans, and other key financial issues for Canadian consumers at each stage of their life.