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The emails queries keep coming and most relate in some way to tariffs and trade. Let’s take a look.
Q – What ETFs and percentages would you recommend I invest in for my 3- and 6-year-old grandkids’ RESP portfolios, keeping in mind the trade war? – Joe V.
A – You’re investing with a reasonably long time horizon – about 12 years for the oldest grandchild. For that reason, I would focus on equities, either in the form of ETFs or mutual funds to maximize diversification. Right now, I would emphasize U.S. securities as they are less vulnerable than Canadian stocks in a trade war.
You might consider a portfolio that looks something like this:
Q – I have approximately $900,000 in cash from some stock sales. I’m worried about the TSX and tariffs. I’m thinking of putting this money into CASH investment holdings, which currently pays 4.34%. Would you think it is an ok place to park my money for a while as I await clarification of the trade war? I would appreciate your advice in this matter. – Roy B.
A – CASH is the trading symbol for Global X High Interest Savings ETF. It’s one of several ETFs that invest in bank savings accounts that offer higher returns than a retail investor can obtain because of their purchasing power.
All these ETFs are much the same. They all trade at about $50 per unit and don’t vary much. Any difference in the interest they pay is fractional.
The important fact to recognize is that as interest rates decline, so does the monthly payout on these ETFs. Last year at this time, CASH was paying $0.20 a month. The most recent payment was $0.11. If that were to continue, the forward yield right now is 2.64%.
However, that’s unlikely. If the trade war continues, the Bank of Canada will likely keep cutting interest rates in an effort to stimulate a reeling economy. Some economists predict three more quarter-point cuts this year, taking the Bank’s key rate down to 2% by Dec. 31. Each of those cuts will reduce the yield on ETFs like CASH.
As long as you understand this and are willing to accept a steady decline in cash flow, these ETFs should be a secure place for your money. But to be on the safe side, I would check out a couple other parking spots as well, such as the iShares Premium Money Market ETF (TSX: CMR). It operates in much the same way as CASH, so the return will slide as rates decline. But by adding it or another like it, you avoid putting all your eggs in one basket.
Q – Is hedging U.S. stocks with Canadian ETFs a good way to protect against loss if the loonie goes down? – Ron L.
A – If I understand your question correctly, the answer is no. If you own U.S. stocks and the loonie goes down, the value of your American holdings will increase in Canadian dollar terms. The only reason to hedge U.S. stocks is if you believe the loonie will rise against the greenback – which is unlikely as long as the trade war continues.
Q – I was wondering about HISU.U and similar funds. This one trades on the TSX, but the website says it is a high interest savings ETF on the U.S. side. Is this just hedged? Also, is there a recommendation for a U.S dollar high interest savings ETF in pure U.S. funds? – Dennis F.
A – HISU.U is the ticker symbol for the US High Interest Savings Account Fund - Unhedged ETF Units. Although it trades on the Toronto exchange, the units are denominated in U.S. dollars and the fund invests primarily in U.S. dollar high interest accounts. So, this is the type of pure U.S. dollar fund you’re looking for. It’s not hedged back into Canadian dollars; all the transactions are in American currency.
The fund had a net yield of 2.57% at the time of writing, according to the Evolve website. The one-year return to Feb.28 was 4.17%, but I don’t expect it will be that high in 2025. Declining interest rates will eat away at that yield.
Note that the return does not reflect the currency gain for Canadian investors. That would boost the profit significantly. Of course, if the loonie rebounds, the exchange rate differential will work against you.
Q – I am a 73-year-old widow, and I thought that I was too heavily invested in equities, although I had a good return last year. After listening to several fund managers saying that 2025 could be very volatile with all the uncertainties in the U.S. with Trump policies, I asked my portfolio manager to put my money in less risky investments. This is what he suggested and did.
I wanted to be in cash in case there is a big correction, so I can buy low. I would appreciate a second opinion as I am very nervous about a market crash and the bad policies from the Trump government that could be inflationary. – Charline R.
A – Your advisor certainly listened. You now have only 10% exposure to equities. The money market fund (40%) is the equivalent of cash, and the U.S. Monthly Income Fund (50%) holds American fixed income securities.
It’s a quibble, but I’d rather see the 10% equity position be invested in U.S. stocks. With tariffs being imposed, Canadian stocks will suffer, including large cap issues.
If you have a money question, send it to me at gordonpape@hotmail.com and write Fund Library Question on the subject line. I can’t promise a personal response, but I’ll answer as many questions as possible in this space.
Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.
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Notes and Disclaimer
Content © 2025 by Gordon Pape Enterprises. All rights reserved. Reprinted with permission. The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.
Image: iStock.com/Valerii Evlakhov
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