Tag Archives: cash

Investing in the AAT770 Daily High Interest Savings Account Fund, HISA, for BMO InvestorLine RRSP, TFSA and Other Accounts

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Sometimes you have cash sitting around in your investment account. You may be waiting for a market pullback. You may be waiting for fixed income rates to improve before locking in for a longer term. You may need to make a withdrawal from your RRIF or your TFSA soon and need to keep the money handy in cash. Till recently, that meant getting no interest at BMO InvestorLine, or getting a very low interest rate if you could risk locking the money in for 30 days in a cashable GIC with a minimum $10,000 investment. Or, if you had $25,000 or more, you could have purchased units of a high interest savings account fund such as ATL5000. Now, in April 2013, BMO InvestorLine is offering a new choice in daily high interest savings accounts with a somewhat better minimum.

A Vote of Thanks to a Reader for Highlighting this New Option

I’d just like to publicly thank John who pointed out this new option is available. It is much appreciated both by me and I’m sure by other readers!

Investing in BMO AAT High Interest Savings Account Funds

The new offering is two funds:

  • AAT770 the BMO AAT CAD High Interest Savings Account
  • AAT780 the BMO AAT USD High Interest Savings Account

Each fund has a value of 1.00 dollars per unit. AAT770 is Canadian dollars. AAT780 is US dollars.

What is the “High” Interest Offered on These Funds?

“High” in these days of record low interest rates is a bit of a stretch.

UPDATE: On October 3, 2017, AAT770 is paying 0.95% and AAT780 is paying 0.5%.
UPDATE: On March 18, 2017 AAT770 is paying 0.75% and AAT780 is paying 0.5%.
UPDATE: On January 29, 2014 AAT770 is paying 1.25% and AAT780 is paying 0.25%.
UPDATE: On November 2013, AAT770 is paying 1.25% and AAT780 is paying 0.20%.

The rates offered as of April 11, 2013 are: AAT770, 1.27% on Canadian dollar investments;AAT780, 0.25% on US dollar investments.

What is the Minimum Investment Required to Buy Units in AAT770 or AAT780?

For both funds, the minimum initial purchase is $5,000. Subsequent purchases can be $500 or more. UPDATE: 2017 10 03, minimum purchase is $1 000 and subsequent purchases can be $50 or more.

While I haven’t tested it yet, I expect to find that you must keep a minimum balance of $5,000 (UPDATE now $1000) per fund. With the old $25,000 minimum funds like ATL5000, if you tried to sell a few units and drop below a holding of $25,000 it would refuse the transaction, telling you to either sell all or none.

I will test this minimum in the future, but first I have to buy some!
[UPDATE: As of April 2013 when I tried a partial sell that would take my balance below $5000 the system would not let me enter the order. It said I had to keep a balance of $5000 or sell all.]

I have tested whether the system will let you purchase less than $5000. It won’t.

NOTE: Although a $5,000 minimum is much better than the previous $25,000 minimum required by InvestorLine, it’s still quite high. You can invest in ATL5000 with a $1000 minimum at CIBC. UPDATE: As of 2017 10 03 you can also invest in AAT770 with a minimum of $1 000.

Is There an Early Redemption Fee for AAT770 or AAT780?

As with ATL5000 there should not be an early redemption fee. I will also be testing this in future.
[Update: As of April, 2013 I redeemed all units in my RRSP account. There was no fee deducted from my account either for the buy or the sell. I redeemed fewer than 7 days after purchasing.]

However, with any daily interest product the interest is calculated daily but paid monthly. So if you redeem all of your units before the interest is paid for that month, you will forfeit that interest. This is similar to withdrawing all of your money and closing a daily interest bank account. (I hope to test the options Cash and Reinvest, however. Perhaps you can still get your interest paid out to your cash account even if you sell all of your units before month end. I will report on that if and when I get a test done.)

[Update: To my amazement, when I did a test redemption in April 2013, they actually paid out the interest accrued during the very short time (less than 1 month) that the money was invested. Apparently I’ve been wrong about this and I apologize to BMO InvestorLine for my misguided thinking.]

Is There a Commission or Fee to Buy AAT770 or AAT780?

There does not appear to be any fee or commission to purchase these units. The fund is described as “No Load” on the purchase order screen. I will be testing this, too.
[Update: I did a purchase and sale within a few days of each other and was not charged any fees in April 2013.]

What Next?
I’m off to test the product with a buy and, after it settles, a sell. I also want to make a buy and hold it to see how the interest gets paid.

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PLEASE share your experiences with high interest savings accounts at InvestorLine or other online brokerages. One reader already brought this new option to light through a comment. Your thoughts may be equally useful to other investors.

How to Buy a GIC in a BMO InvestorLine Account

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UPDATE: In late 2015, BMO InvestorLine changed its GIC purchase procedures. Please see the newest article: How to Buy a GIC at BMO InvestorLine with the New (2015) Fixed Income Investment Screens

If you keep a base of GICs in your RRSP portfolio like I do, you may decide to buy and manage them through your online brokerage account. Doing so makes renewals simpler and helps ensure you get a competitive rate without phoning your bank time and again to complain. There is no fee or commission to purchase GICs through a BMO InvestorLine account. The rates, perhaps surprisingly, are the same as those offered directly from the same financial institutions. For a list of which institutions InvestorLine lets you buy from, please check the article Comparing GIC Rates for BMO InvestorLine, CIBC Investor’s Edge. When you’re ready to spend your money, here’s how to buy a GIC from InvestorLine.

How to Purchase a GIC in your BMO InvestorLine Account

Sign in to BMO InvestorLine

  1. Go to https://www.bmoinvestorline.com/
  2. To sign in, type your User ID or Account Number, and Password and click on the Go button.
  3. If you have more than one trading account, from the drop-down list select the account within which you want to buy the GIC. For example, I selected my RRSP account.

Review the List of Available GICs and the Terms of Sale

  1. From the Trading Tab, select Fixed Income.
  2. From the Inventory Search column, select GICs.
  3. Unless you have some specific search criteria you wish to use, on the Inventory Search – GICs screen, click on the Search button. This will generate a list of all available GICs. For details on what types are offered look near the end of this article.
  4. If you don’t remember the details, read through the conditions which apply to GIC purchases. For example, the trading hours are 9:30 a.m. to 3:45 p.m. except on early closing days. GIC purchases close the next business day. (T+1)
  5. The list is sorted by Type and Cashable, then by Term, then by Interest Rate.
  6. When you spot the GIC you want to purchase, click on the corresponding name of the financial institution offering the GIC in the column on the left.
    For example, I selected a 1 year annual interest GIC from Home Trust Co at 1.85%.
  7. If you are not sure who the financial institution is, it’s worth taking a minute to visit their website and look at the company details. Also, you can always check whether they are covered by CDIC insurance by checking the list on the CDIC website, www.cdic.ca/.

To Order a Listed GIC

  1. On the GIC Order Entry screen,
    In the Amount box, type the amount of the face value of the GIC you wish to purchase. The minimum is usually $5000. You can choose odd amounts like $5023 if you wish, for instance if you are re-investing interest, income or dividends.
  2. In the Contact Phone Number, type the number you can be reached at to discuss this purchase.
  3. Click on the Review Order button.
  4. The GIC Order Review screen will open.
  5. Please note: Once submitted GIC orders can NOT be cancelled! If you choose a non-cashable GIC (which is most of those offered) your money will be locked in for the term of the certificate. Most GICs are not cashable!
  6. Review the amount, term, interest rate, interest payment terms, and issuing company.
    If everything looks fine, in the Please Enter Your Password to Submit This Order field, type your password.
  7. Click on the Submit Order button.

Be aware that the money will not be removed from the display of your Cash account until the second next business day! Be careful not to spend the same money twice, accidentally.

What Happens After You Purchase a GIC from BMO InvestorLine

You will receive confirmation that the order is filled in your Transaction History in 2-3 business days.

Usually, you will also receive a paper statement in the mail confirming the purchase and its terms.

When any interest is payable, it will appear in the Cash section of your trading account. It usually appears one business day after it was payable, but is back dated to the date it was paid. For example, if the certificate matures on April 10, 2013 (a business day), the cash will be in your account on April 11, but the posted date in the transaction history will say April 10. NOTE: BMO states that interest payments can take 1-5 business days to be received.

When the certificate matures, the original principal will be returned to your Cash balance in your trading account. Certificates do NOT rollover or re-invest. You will receive a message on your MyLink secure email about a week before a certificate matures to remind you to reinvest the money.

As with interest payments, the capital usually arrives in your cash account on the business day after the certificate matures. In the transaction history, this payment will be back dated to the date the certificate matured.

Typical Types of GICs Offered for Purchase by BMO InvestorLine

  • GICs cashable after 30 days with a term of 1 year (all other GICS are NOT cashable!)
  • 1 year GICs that pay interest when they mature
  • 1 year GICs that pay interest twice per year (note they offer lower interest rates than those that pay interest only once per year)
  • 1 year GICs that pay interest monthly (note these often have interest rates comparable to the semiannual GICs)
  • 2, 3, 4, or 5 year GICs that pay interest at the end of each year
  • 2, 3, 4, or 5 year GICs that pay interest at maturity, and the interest compounds after each internal annual payment of interest
  • 2, 3, 4, or 5 year GICs that pay interest twice per year (note they offer lower interest rates than those that pay interest only once per year)
  • 2, 3, 4, or 5 year GICs that pay interest monthly (note these often have interest rates comparable to the semiannual GICs)

NOTE: No GICs are listed with terms longer than 5 years. This is good as CDIC only insures GICs with terms of 5 years or shorter.

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Have you purchased GICs through an online brokerage? Were you satisfied with the process? Please share your experiences with a comment.