How to start saving for a house down payment and make an annual return of 5%. Plus, the lure of covered-call ETFs (2023)

Please log in to bookmark this story.Log InCreate Free Account

High interest rates are hard on the housing market, but great for people trying to save a down payment.

Rates on the safe savings vehicles appropriate for home down payments are at the highest level in decades. With virtually zero risk, you can earn 3 to 5 per cent.

Both stocks and bonds have moved higher in 2023, a contrast to the trash returns last year. Donโ€™t be tempted to put your home down payment into the markets, though. While thereโ€™s potential for outsize returns, you could also lose money.

Hereโ€™s a home-saving strategy that costs nearly nothing and allows your money to grow at a nearly risk-free rate of 4.85 per cent. Thatโ€™s better than those completely risk-free savings accounts covered by deposit insurance, where rates top out in the 3 to 3.75 per cent range.

To start, open an account with a no-cost stock trading app like Wealthsimple or TD Easy Trade, ideally using a tax-free savings account to avoid paying tax on your interest income. The new Tax-Free First Home Savings Account, likely to go live in April, will be a great option, too.

Your savings will go into high interest savings account exchange-traded funds, also known as cash-equivalent ETFs. These funds keep the money invested by clients in accounts at big banks. The money in HISA ETFs is not protected by deposit insurance, but the bank accounts used can be considered quite safe.

(Video) Renting vs. Buying a Home: The 5% Rule

The interest rate on HISA ETFs is typically about 4.85 per cent right now after fees, which you can track by checking a fundโ€™s management expense ratio. MERs for this type of ETF tend to be in the area of 0.15 per cent.

ETFs trade like stocks, which means a lot of brokers charge a commission of $5 to $10 per buy or sell. But Wealthsimple charges zero to trade, and TD Easy Trade gives you 50 free trades a year. This means you can buy HISA ETFs on a regular basis at no cost.

For example you could add money to your trading app and buy some ETFs every time you get paid. If you have some money left at the end of the week, you could buy some more. When itโ€™s time to buy your home, youโ€™d sell your holdings and transfer the cash to your chequing account.

The interest rate on HISA ETFs follows the Bank of Canadaโ€™s overnight rate, which is expected to stay put for a while after a big run-up last year. The next move is most likely down, but thatโ€™s not expected to happen until late this year or early next.

The next 11 to 12 months offer an opportunity for homebuyers savers to earn interest on their savings at a rate close to 5 per cent, with vastly less risk than stocks offer. If you plan to buy a house, get on it.

Finally, a quick list of HISA ETFs:

  • CI High Interest Savings ETF (CSAV-T)
  • Evolve High Interest Savings Account Fund (HISA-NE)
  • Horizons High Interest Savings ETF (CASH-T)
  • Ninepoint High Interest Savings Fund ETF (NSAV-NE)
  • Purpose High Interest Savings ETF (PSA-T)

-- Rob Carrick, personal finance columnist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or youโ€™re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

The Rundown

Your retirement plan needs these three stocks

The primary rule for retirement plans is to conserve assets. Whether you use an RRSP or a TFSA for your savings, itโ€™s essential to protect your principal. Growth is important, of course, but if you suffer heavy losses you may never recover them. Gordon Pape profiles three dividend-paying securities to get you started. Heโ€™d be astonished if they are not more expensive in five years than youโ€™d pay now.

(Video) QYLD High Dividend Covered Call ETF | Passive Income Monthly

The new shareholder friendly energy company: Big on dividends, forget renewables

BP PLCโ€™s share price rallied this week after the British-based energy giant released its quarterly financial results, but the gains had little to do with gargantuan profits or a big dividend hike. Instead, it appeared largely tied to the companyโ€™s updated commitment toward slashing its oil and gas production by 2030: With profits booming from robust fossil fuel prices, thereโ€™s now going to be significantly less slashing in the coming years. As David Berman tells us, Itโ€™s a pivot that other producers are likely noting as surging profits from oil and gas lead to a fresh appreciation of traditional energy assets.

Swimming against Brookfieldโ€™s tide of positivity

Everyone, it seems, loves Brookfieldโ€™s sprawling investment empire and last week demonstrated some of the reasons why. On Wednesday, Brookfield Asset Management Ltd., the pure-play alternative-asset manager that was spun out of parent Brookfield Corp. in December, delivered its first earnings report. It said it raised US$93-billion in capital in 2022, a record for the Brookfield group. A day later, Bruce Flatt, chief executive of Brookfield Corp., reiterated his commitment to continue delivering compound annual returns of 15 per cent a year or better. Meanwhile, ten out of 12 analysts rate Brookfield Corp. as a buy. Only a curmudgeon would swim against this torrent of positivity. So, on behalf of curmudgeons everywhere, Ian McGugan steps forward and attempts to do just that.

The high-yield, but defensive ETFs that Canadians canโ€™t get enough of: Covered-call funds

Choppy markets have supercharged Canadiansโ€™ hunger for defensive, yet high-yield investments, and lately many are piling into a subset of exchange-traded funds that fit this bill โ€“ some with payouts around 13 per cent annually. Covered-call funds have existed for some time, yet investor interest in them has soared over the past year. Tim Kiladze tells us more about them, including their drawbacks.

Tracking high-yield stocks over 46 years

The Canadian stock market as a whole was bested again by high-yield stocks in 2022. But that shouldnโ€™t be a surprise, because stocks with high yields have outperformed in 28 of the past 46 years โ€“ often by a substantial margin. Norman Rothery has the details.

Last yearโ€™s laggards lead U.S. stocksโ€™ 2023 rebound, for now

U.S. stocks that took a beating last year are surging in the early weeks of 2023, leading markets higher. Some investors believe that trend is unlikely to last, especially if markets continue recalibrating expectations for how high the Federal Reserve will need to raise rates this year to keep cooling off inflation.

Others (for subscribers)

(Video) ๐๐ž๐ฌ๐ญ ๐๐š๐ง๐ค ๐š๐ง๐ ๐๐ซ๐จ๐ค๐ž๐ซ๐ž๐ ๐‚๐ƒ ๐€๐œ๐œ๐จ๐ฎ๐ง๐ญ๐ฌ ๐Ÿ๐ŸŽ๐Ÿ๐Ÿ‘ | Guaranteed 5.8% MYGA Return!

The highest-yielding stocks on the TSX, plus risk data

The most oversold and overbought stocks on the TSX

Mondayโ€™s analyst upgrades and downgrades

Globe Advisor

Municipal bonds can boost returns and diversify fixed-income portfolios but face liquidity, rating risks

How to manage RRIF withdrawals tax-efficiently to avoid โ€˜a hefty penaltyโ€™

Are you a financial advisor? Register for Globe Advisor ( for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation - a powerful tool to help you manage your clientsโ€™โ€™ portfolios.

Ask Globe Investor

Question: I am 63 years old and plan to retire in a few years. My portfolio is invested 90 per cent in equities and 10 per cent in guaranteed investment certificates. Is it time to go more conservative, such as a 60/40 mix of stocks and GICs?

Answer: There is no one-size-fits-all solution when deciding on an optimal asset allocation. The answer depends on many factors, including your age, risk tolerance, spending plans in retirement, net worth and how much income you expect from government and company pensions.

If you will be retiring with an inflation-indexed defined-benefit pension plan that will cover most of your living expenses, for example, maintaining an aggressive asset mix may be appropriate. I know seniors who are comfortable investing most, if not all, of their portfolio in stocks. Typically, they are experienced, relatively affluent investors who would have no financial worries even if the market were to go into the tank for several years.

(Video) 6 Top Dividend ETFs In Australia (Make $1,000 Per Month of Passive Income)

The kinds of stocks you own are also a consideration. A portfolio of dividend-paying utilities, banks and consumer staples companies is going to be more stable than one stuffed with tech stocks and speculative investments.

On the other hand, if you donโ€™t have a DB pension and will be drawing down your portfolio to pay for living expenses, it may be prudent to switch to a more conservative mix of stocks and fixed income. You donโ€™t want to have to cash in stocks in the middle of a bear market to pay your grocery bills.

You should also keep in mind, however, that you could easily live for another decade โ€“ or two or three โ€“ after you retire. For someone who is 65 today, the average life expectancy for men is nearly 82 years, and for women itโ€™s nearly 86, according to Statistics Canada. Thatโ€™s a long time for the stocks in your portfolio to appreciate and for their dividends to grow, so playing it too safe could have negative consequences โ€“ not just for you, but also for your heirs. GICs are predictable, but they donโ€™t provide capital or income growth, and the interest is taxed at higher rates than dividend income.

As you get closer to retirement, you may wish to meet with a fee-only financial planner who can run some financial projections based on different market scenarios and asset allocations. A good planner can help you find your personal โ€œsweet spotโ€ where your mix of stocks and GICs or bonds lets you enjoy your retirement without worrying that youโ€™re being too aggressive, or not aggressive enough. That equilibrium point will be different for everyone.

--John Heinzl (E-mail your questions to

Whatโ€™s up in the days ahead

The Contra Guys take a long-distance journey to Brazil for their next stock pick. Plus, Gordon Pape will review his model RRSP portfolio, which continues to outperform his target.

Click here to see the Globe Investor earnings and economic news calendar.

We want to hear from you

The Globe is looking for young Canadians to take part in our Paycheque Profile series, a non-judgemental look at how young workers are spending, saving, allocating and investing their money. To see if you are a good fit for taking part in a profile, please email Globe personal finance editor Roma Luciw at Here are a few recent examples of profiles:

ยท 26-year-old film worker earns $73,000, but worries about his future

(Video) Top 5 Income ETFs to Buy | QYLD vs RYLD vs JEPI and More

ยท Calgary engineer, 32, aims to pay down a $150,000 loan debt, money that he used to invest

ยท B.C. woman, 29, earning $50,600 owes $55,000 from student years: โ€˜How are we going to afford to get married, buy a house and have kids?โ€™

Compiled by Globe Investor Staff


What is the downside of a covered call ETF? โ€บ

There are two risks to the covered call strategy. The real risk of losing money if the stock price declines below the breakeven point. The breakeven point is the purchase price of the stock minus the option premium received. As with any strategy that involves stock ownership, there is substantial risk.

Can you do covered calls on ETFs? โ€บ

A great example here are exchange-traded funds, or ETFs, that use options buy-write strategies. These ETFs all hold various underlying stocks or bonds and sell covered call options against them. By selling the call, the ETF agrees to sell the underlying shares at a set price, called the strike.

How to invest in ETFs for beginners? โ€บ

How to buy an ETF
  1. Open a brokerage account. You'll need a brokerage account to buy and sell securities like ETFs. ...
  2. Find and compare ETFs with screening tools. Now that you have your brokerage account, it's time to decide what ETFs to buy. ...
  3. Place the trade. ...
  4. Sit back and relax.
Feb 1, 2023

How do I set up an ETF account? โ€บ

Here's how to start buying ETFs.
  1. Open a Brokerage Account. Because you can't just go to the store to purchase a basket of ETFs, the first thing you need to do is open a brokerage account. ...
  2. Decide on Your ETF investment Strategy. ...
  3. Research Your ETFs. ...
  4. Buy the ETFs. ...
  5. Set Up Your Purchase Plan. ...
  6. Decide on Your Exit Strategy.
Jan 6, 2023

Why are covered calls risky? โ€บ

Risks of Covered Call Writing

The main risk is missing out on stock appreciation in exchange for the premium. If a stock skyrockets because a call was written, the writer only benefits from the stock appreciation up to the strike price, but no higher.

When should you buy back a covered call? โ€บ

Suppose, for example, that the stock price rose above the strike price of the covered call. If you do not want to sell the stock, you now have greater risk of assignment, because your covered call is now in the money. You therefore might want to buy back that covered call to close out the obligation to sell the stock.


1. The Financially-Dumb Answer to Pay Off the Mortgage or Invest
(Let's Talk Money! with Joseph Hogue, CFA)
2. I Pay my Phone Bill with THIS Monthly Dividend Stock
(Let's Talk Money! with Joseph Hogue, CFA)
3. How to invest in Real Estate in Germany | Real Estate investing Ep.1 | How to become a Millionaire
(Abhishek Das Thakur)
4. iShares Head of Fixed Income Strategy on Bonds, Interest Rates
(ETF Prime)
5. Introduction to Managed Funds
(Reza Houston at Ball State)
6. Investing In Stocks For Beginners
(Proactive Thinker)
Top Articles
Latest Posts
Article information

Author: Aracelis Kilback

Last Updated: 31/07/2023

Views: 6258

Rating: 4.3 / 5 (64 voted)

Reviews: 87% of readers found this page helpful

Author information

Name: Aracelis Kilback

Birthday: 1994-11-22

Address: Apt. 895 30151 Green Plain, Lake Mariela, RI 98141

Phone: +5992291857476

Job: Legal Officer

Hobby: LARPing, role-playing games, Slacklining, Reading, Inline skating, Brazilian jiu-jitsu, Dance

Introduction: My name is Aracelis Kilback, I am a nice, gentle, agreeable, joyous, attractive, combative, gifted person who loves writing and wants to share my knowledge and understanding with you.