What is a money market fund in Canada?

Unlike other mutual funds, Canadian money market mutual funds aim to maintain a constant unit price, usually $10. (U.S. money market funds are generally priced at $1.) As the value of the investment rises above $10, the excess funds are returned to investors. 

Most money market funds are mutual funds, but a few are exchange-traded funds (ETFs). The goal of both is to provide you with a higher return than you would earn with a savings account, without taking on significant additional risk. 

Canadian Securities Administrators, the national body representing Canada’s provincial and territorial securities regulators, considers money market funds cash equivalents, like guaranteed investment certificates (GICs) or savings bonds. While most have low to medium risk, some Canadian money market funds invest in higher-risk securities to increase returns. 

Unlike GICs, money market funds allow you to access your money at any time. However, money market fund distribution yields fluctuate with interest rates, so you can’t lock in at a specific rate. Your return will depend on the overall Canadian interest-rate environment.

Like other mutual funds and ETFs, money market funds in Canada charge management fees. Some also have initial purchase minimums, typically $500 to $1,000. 

You can research Canadian money market funds at Morningstar.ca, under the Tools menu. Find money market mutual funds using the Fund Screener tool and money market ETFs with the ETF Screener. Morningstar’s screeners allow you to compare yields, fees, minimum investments and other factors. 

Example: “Audrey invested the money she’d saved for a down payment in a Canadian money market fund. The fund provided a better return than her savings account, and she could easily access the money when she needed it.” 

Read more on saving and investing:

• The best cash-alternative ETFs in Canada
  Recognizing the surge in popularity of high-interest savings and money market ETFs, we added a new cash-like category to our annual Best ETFs in Canada report.
• The best GIC rates in Canada
  Find the best GIC rates in Canada. Plus, everything you need to know about how they work.
• The best savings and investment accounts in Canada
  Here are the best accounts to hold your savings and investments.
• What the Bank of Canada’s first rate cut in 4 years means for your finances
  The central bank’s overnight interest rate sets the tone for the prime rates offered by banks. We explain what changes in the policy rate mean for you.

About MoneySense Editors

MoneySense editors and journalists work closely with leading personal finance experts in Canada. Since 1999, our award-winning magazine has helped Canadians navigate money matters.

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