Invest Your Managed Account in a High Interest Savings Portfolio

If you have an investment account managed by a third-party, you might be contemplating ways to diversify your money. When building wealth for long-term goals like retirement, investing in index funds, mutual funds, exchange-traded funds, and other beneficial, lower-risk types of investments is a good idea.

However, as you approach retirement age, you might be looking for ways to access more of your cash upfront. One option is investing part of your managed account into a high-interest savings portfolio.

Here’s everything you need to know about managed accounts, the high-yield savings portfolio, and how to decide the right next move for your investments.

What is a managed account?

A managed account is an investment account that a wealth investor manages on your behalf. You might meet regularly with your financial advisor to share your long-term financial goals, and they will then implement them into a specified investment plan tailored to your needs.

Opting for a managed investment account can be preferable for anyone not interested in managing their own portfolio or who is seeking professional help and guidance. You can expect expert advice and tax-saving strategies when working with an experienced wealth professional.

When investing your money online at a brokerage site, you’re typically creating a managed account.

What is a high-interest savings portfolio?

In Canada, a high-interest savings portfolio is an exchange-traded fund (ETF) or other investment funds that invest in various banks that pay interest. Investing in a high-interest savings portfolio is best for short-term goals, like saving for a home down payment or a new car purchase.

That’s because high-interest savings portfolios are more limited in their earnings than other investment accounts that trade on the stock market. Right now, savings rates in Canada may be near or at 5%, but once they drop, you’ll earn considerably less with a high-interest savings portfolio.

If you’re approaching retirement age, however, you might want access to more of your money as soon as you retire. In some cases, it might make sense to convert a small percentage of your managed account to a high-interest savings portfolio. But you should always talk to a financial advisor before doing so. There may be other ways to get quick access to cash without compromising the value of your portfolio.

Is a high-yield savings account an investment account?

No, a high-yield savings account that you can open at a bank or credit union is not an investment account. Instead, it is a savings vehicle that earns interest at a bank’s set rate. However, since high-yield savings accounts earn variable interest, the rate can change over time depending on the bank’s preference and the economy.

A high-yield savings portfolio, however, is an investment account. It is generally a fund that is spread out across several bank’s high-interest savings accounts.

Should I roll my managed account into a high-interest savings portfolio?

There are a few cases where switching your managed account into a high-yield investment portfolio will be financially beneficial. However, there may be certain situations where it does make sense, depending on your age, savings goals, debt, and other financial obligations.

Before converting any part of your managed investment account into a high-yield savings portfolio, talk to a financial counsellor.

Alternatives to a high-interest savings portfolio

If you’re not sure if converting part of your long-term savings to a short-term savings portfolio makes sense, you do have other options that also let you take advantage of today’s high savings rates.

• Open a high-yield savings account. Instead of touching your investment, check your bank’s current savings rate to see if you’re earning near 5%. If you’re not, consider opening a high-yield savings account and moving your money there to start earning more. If you don’t have savings, you can set up an automated transfer from your paychecks to a high-yield savings account to begin building your savings.

• Lock in a high guaranteed interest certificate. Since savings interest rates are variable, you don’t always earn a predictable return in a savings account. If you want to earn a fixed-rate on your savings for a short-term goal, you might consider a guaranteed interest certificate (GIC), instead. As long as you have the money saved, you’ll lock in your interest rate and leave your funds in the account for a set period of time. Then, when your term expires, you’ll withdraw your principal and any interest you’ve earned.

What other investment accounts can help grow my money?

There are a variety of stock exchange accounts you might want to invest in to grow your money long term. If you have a managed account, you can invest your money in Canada in a variety of them. Some popular options include:

• ETFs

• Index funds

• Mutual funds

• Buying stocks on the stock exchange

• Bonds

When saving for retirement, you’ll also want to make sure you have a Canadian Registered Retirement Savings Plan or Tax-Free Savings Account.