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If you have large amounts of cash sitting in the bank right now instead of in other assets like ASX shares, I wouldn’t blame you. We’re currently living with the highest interest rates the Australian economy has seen in more than a decade.
While that makes paying off the mortgage pretty tough, it also means that the income we can receive from cash assets like savings accounts and term deposits is also at a decade-high.
Term deposits vs ETFs
Saying that, you still have to extensively shop around for the best interest rates for your savings. Accounts and term deposits that are offered by the big four banks, including Commonwealth Bank of Australia (ASX: CBA) are rarely the best on the market. And even if you do find a market-beating cash asset, chances are it will come with conditions attached.
This could be a requirement that you tap your card a certain amount of times. Or else you make no withdrawals in the month you want to receive your full interest rate.
It’s for that reason that many investors who wish to seek the safety of cash might like to consider a cash ASX exchange-traded fund (ETF).
Yes, these cash-based ETFs do trade on the stock market. But they are not shares, and do not represent an investment in shares. As such, they don’t come with the same sort of volatility that cash investors might be seeking to avoid by keeping their money in the bank. However, they do still come with those same interest rates we can enjoy on our savings accounts and term deposits. And sometimes even better.
Both of the funds I discuss below are designed to be completely liquid. This means that (unlike a term deposit) you can sell out of them at a moment’s notice. It will also be worth taking a look at their unit prices, so you can see how involatile they are compared to your traditional shares.
2 ASX cash ETFs to consider today
BetaShares High Interest Cash ETF (ASX: AAA)
This ETF form provider BetaShares allows investors access to a portfolio of cash assets that are “invested in deposit accounts held within selected banks in Australia”.
The AAA ETF pays out dividend distributions monthly, and currently has a running interest rate of 4.44%. That’s with a trailing distribution yield of 3.6% over the past 12 months.
It charges a management fee of 0.18% per annum.
iShares Core Cash ETF (ASX: BILL)
Another option to consider is this offering from BlackRock. Similarly, the iShares Core Cash ETF offers monthly distributions. It works slightly differently to Betashares AAA, offering cash assets as well as short-term money market instruments among both Australian and international banks.
The BILL ETF has a present running interest rate of 4.43% and has yielded 3.7% over the past 12 months. This fund charges a management fee of 0.07% per annum.