Gyroscopic Investing

I wondering what you guys think about this.  In Canada, there are no ETFs that hold canadian government treasury-bills available.

On crawling road, it is mentioned that you use a 1-3 year short term US goverment bond etf in the place of a T-Bill ETF for slightly higher returns. 

In Canada, you can't find that either.  The best I can find is BMO's Federal Short Term Bond ETF that holds only AAA rated debt of the Canadian government that matures in 1-5 years (about 20% maturity in each year). 

I'm wondering if you think holding this ETF for the cash portion of the permanent portfolio would be better than holding T-Bills.  Currently I'm using a high interest savings account, which is backed by government insurance, but I would like to switch to something more secure.  If I want to go with T-Bills, I would have to buy them directly, which I think is also an option, but the ETF would be easier!

Thanks for your thoughts,
Mark

If you anticipate using the cash portion as an emergency fund, then the extra ease of access can justify a fund. In this case, that fund is a little far out on the yield curve (average 3 years) and you might take small intra-year losses on it if rates rise quickly. As long as you're comfortable with that risk, it's probably okay.

Eh. This is going to depend on risk tolerances. Not my first choice but it sounds like your alternatives are limited.  If you have a nice emergency fund in the bank or somewhere super safe, I'd probably go with it.

ZFS and ZFL will create the desired barbell.  Keep in mind that ZFL has a duration of 14.3 years, while TLT is 16.7 years.  To make up for this it makes sense to increase the duration of your short bonds (or increase weighting to ZFL).

Barbell duration calculation:

ZFS/ZFL = 2.7*0.5 + 14.3*0.5 = 8.5 years

SHY/TLT = 1.9*0.5 + 16.7*0.5 = 9.3 years

So using the BMO ETFs will result in a slightly lower bond duration, but it's close enough.

I was asking a similar question about Canadian cash holdings in this thread: http://gyroscopicinvesting.com/forum/pe ... nadian-pp/

One possibility are high-interest investment savings accounts which yield less than ZFS (1.25% vs 2.36% for ZFS) but are fully insured and fully liquid, and have no risk of capital loss, making them more "pure" cash in my view.

These are sold as mutual funds through your broker, but have no MER, no load and no commission, and the minimum time to hold is just 1 day so they are fully liquid.

Some examples:

Altamira CashPerformer: http://www.nbc.ca/bnc/cda/feeds5/0,2726 ... 54,00.html
Renaissance High Interest Savings: http://www.renaissanceinvestments.ca/en ... s/hisa.asp
TD Investment Savings: http://www.tdam.com/Content/Products/p_ ... asp?PID=27