Here’s a look at how cash ETFs work for investors

Article Excerpt

Low-risk ETFs as described above can provide you with a way to hold cash balances in your investment or trading accounts. Here are some of the pricing arrangements and technical terms unique to these funds. Money market ETFs have a base price of $50 or $100 that adjusts daily as interest accrues in the fund. When the interest is paid out (mostly once a month), the price of the fund drops back to the base price. Taking the Purpose High-Interest Savings ETF as an example: The base price of this ETF is $50 (Canadian). During April 2020, the price of the units increased steadily until a price of $50.04 was reached on April 27, 2022. On April 28, the price dropped back to $50 per unit to adjust for the distribution. Distribution yield is the annual yield an investor would receive if the most-recent distribution stayed the same going forward. It’s calculated by annualizing the most-recent distribution and dividing it by the net asset value. Counterparty…