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Originally Posted by I-Hate-Hulse
So I totally see what you're saying - that the opportunity cost of having good old cash lying around and not doing anything is too much. That said, I think some users here should really, really have to look at some of the underlying factors before someone adopts this.
I guess it'd come down to how quick can you recover from an "emergency". If you have alternative equities you can sell, or you think you could find a job in a month or three then there's definately merit in what you're saying.
Personally, I'd psychologically hate it if I was laid off, wasn't quite sure how long it'd take to get back on my feet, and have to start borrowing money, lighting that fuse of debt for which it's only so long. (I'm paranoid, I have both an EF (about 3 months worth) and a LoC.
I do intend to use this TFSA account just to hold some of the cash & cash equivalents portion of my portfolio. At $5,000 right now there's not a whole lot that can be done with it. Admittedly, I often have more than I should in cash and equivalents - since I'm relatively young there's no shortage of things to save up for (trips, furniture, etc). These usually take about about 8 months for me to do so the money is not often patient money so a cash account seems to work best for me.
Though I'm open to suggestions - know a good ETF to pop in and out of that has as low a risk as a money market and can beat the 3-3.5% return of your average MM fund?
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I absolutely agree. That's why I said it depends on each individual situation. I have clients who tell me if they were laid off on Friday they'd be working again on Monday somewhere else. Know what, I've seen it happen time and time again. I have one guy who said this and when he lost his job he got another within a few days and increased his salary. It's important that people do this assessment honestly and not deceive themselves or me.
MM funds are not getting 3-3.5%. It's closer to half that ROR. ETFs are not as conservative as MM funds. You could look at a balanced ETF or mutual fund with very low volatility, but they are risker than MM funds. MM funds are crap right now. I'd go with a combination of GICs and high-interest savings accounts instead, or go a bit more aggressive with a very conservation ETF or mutual fund.