Looking for a liquid, accessible, and affordable way to preserve capital while earning interest in a brokerage account? A good option here might be a money market exchange-traded fund (ETF). Money market ETFs are typically low risk and pay out monthly interest much like a guaranteed investment certificate (GIC).
However, unlike a GIC, investors who buy money market ETFs are not subject to a lock-up period. They’re free to buy and sell shares as they see fit, which provides greater flexibility among other benefits.
Here’s all you need to know about investing in Canadian money market ETFs.
What is a money market ETF?
A money market ETF is simply an ETF that holds money market instruments. These are short-term fixed-income securities characterized by high liquidity and low risk that can easily be converted into cash. Examples of money market instruments include U.S. and Canadian government Treasury bills, or T-Bills, commercial paper, GICs, certificates of deposit, repurchase agreements, and banker’s acceptances.1
Now, it’s important to distinguish money market ETFs from their closely related cousin, high interest savings account, or HISA, ETFs. As the name suggests, HISA ETFs hold their assets in deposits with HISAs at various banks. They do not hold the usual mix of assets money markets do and are not money market ETFs.2 However, they have similar characteristics, such as low risk and monthly interest payments.
The return an investor can expect from a money market ETF is expressed by its yield, which can be calculated in two ways:
- Annualized Distribution Yield: This yield calculation takes the most recent distribution paid by the ETF, annualizes it (i.e., projects it over a full year), and then divides the result by the ETF’s current net asset value (NAV). The annualized distribution yield offers a snapshot of the ETF’s potential income-generating potential based on its recent distribution and NAV.
- Trailing 12-Month (TTM) Yield: This yield calculation takes the sum of all the distributions paid by the ETF over the previous 12 months and divides it by the ETF’s current NAV or market price. The TTM yield provides a historical perspective on the ETF’s income generation over the past year.
Neither metric will provide an exact measurement of the yield an investor will receive. Instead, they should be relied upon as useful approximations.
Finally, like all ETFs money market ETFs charge a fee, called a management expense ratio (MER). This is comprised of management fees plus any fund operation, administrative, and marketing expenses. It is expressed as a percentage deducted from your investment annually. For example, a 0.25% MER would result in around $25 in fees annually for a $10,000 investment.
State of Money Market ETFs in Canada in 2025
Canadian money market ETFs continue to offer stable, short-term yield and low volatility, making them a prudent choice for conservative portfolios. ETFs like the BMO Money Market Fund Series, iShares Premium Money Market ETF, and Horizons 0–3 Month T-Bill ETF remain the go-to options, with 2025 yields hovering in the 4–5% range—a notable improvement compared to the sub-2% era prior to the rate hikes of 2022–2023.
Investor demand remains high. As interest rates stayed elevated through early 2025, inflows into money market ETFs showed little sign of cooling. These funds are increasingly being used not only as safe havens for immediate spending (e.g., saving for a home down payment) but also as flexible cash reserves for long-term investors—awaiting stock market opportunities in line with The Motley Fool’s value-driven, opportunity-seeking framework.
Top Canadian money market ETFs
The following Canadian-listed ETFs are either explicitly categorized as money market ETFs or hold similar assets and function similar to money market ETFs:
| ETF Name | Inception Date | Highlights |
| BMO Money Market Fund ETF Series (TSX:ZMMK) | November 29, 2021 | Provides exposure to high-quality money market instruments issued by governments and corporations in Canada |
| iShares Premium Money Market ETF (TSX:CMR) | February 19, 2008 | Provides exposure to a portfolio of short-term high-quality debt securities with income and liquidity |
| Horizons 0–3 Month T-Bill ETF (TSX:CBIL) | April 12, 2023 | Provides exposure to Government of Canada Treasury Bills with remaining maturities generally less than 3 months |
BMO Money Market Fund ETF Series
ZMMK is currently the largest Canadian money market ETF with assets under management of just over $525 million as of April 2023. The ETF holds a mixture of high-quality money market instruments issued by governments and corporations in Canada, which include treasury bills, banker’s acceptances, and commercial paper that mature in less than 365 days.
iShares Premium Money Market ETF
CMR is the longest-running money market ETF in Canada, having debuted during the height of the 2008 Great Recession. The ETF seeks to provide both liquidity and income via a portfolio of short-term high-quality debt securities, which include commercial paper and certificates of deposit.
Horizons 0-3 Month T-Bill ETF
Although not technically a money market ETF, CBIL functions similar enough due to its high liquidity, low risk, and steady income potential. The ETF holds 100% Canadian Federal Government T-bills with maturities of less than three months. These assets are considered risk-free in terms of default and have a low sensitivity to interest rate movements.
Pros of investing in money market ETFs
Money market ETFs have several advantages that make them popular investments among Canadian investors:
- Low risk: Unlike stock or bond ETFs, the value of money market ETFs is designed to remain stable and is unlikely to be hurt by market crashes or rising interest rates. They invest primarily in high-quality, short-term government and corporate debt, minimizing both credit and duration risk. This makes them suitable for conservative investors or those looking to park cash temporarily.
- Income: Money market ETFs usually pay monthly interest and have yields that adjust to reflect rising interest rates. In the current rate environment, many offer yields between 4% and 5%, which is attractive compared to traditional savings accounts and even some GICs. This makes them a compelling income-generating option for short-term capital.
- Liquidity: Unlike GICs, investments in a money market ETF do not have a lockup period. As with any other ETF, money market ETFs can be bought and sold during market hours on the TSX. This allows investors to quickly reallocate funds as needed, making them a flexible alternative for cash management in taxable or registered accounts.
Cons of investing in money market ETFs
However, money market ETFs are not perfect investments by any means. They have some disadvantages, which include:
- Not risk-free: Unlike deposits in a HISA account or GIC, money market ETFs are not insured by the Canadian Deposit Insurance Corporation (CDIC).3. Although they hold high-quality instruments, there is still minimal credit or liquidity risk if markets experience extreme stress.
- Inflation risk: The relatively meagre returns earned by money market ETFs may not be able to keep up with high inflation. During periods of rising consumer prices, even a 4–5% yield may result in a negative real return, eroding purchasing power over time.
- Low returns: Compared to riskier assets like stocks, money market ETFs are expected to earn a much lower long-term return. While they serve well as a cash alternative, they are not suited for capital growth and may underperform other asset classes over multi-year horizons.
| Pros of Money Market ETFs | Cons of Money Market ETFs |
|---|---|
| Low risk | Not risk-free — Not CDIC-insured like HISAs or GICs |
| Monthly income | Inflation risk — Returns may not outpace rising inflation |
| Competitive yield (4–5%) | Low long-term returns compared to equities or growth assets |
| Highly liquid — buy/sell anytime on TSX | Interest rate sensitivity — yields can decline if rates fall |
| Registered account eligible | No capital appreciation — not suitable for growth investing |
| Short-term flexibility | Minor credit/liquidity risk in extreme market conditions |
Are money market ETFs right for you?
Whether or not money market ETFs are a good fit depends on your risk tolerance, investment objectives, and time horizon—core principles aligned with the Motley Fool investing philosophy, which emphasizes long-term thinking, discipline, and alignment between your portfolio and your financial goals.
Money market ETFs are best suited for low-risk investors who need to preserve capital over the short term while earning a competitive yield. For example, if you’re saving for a home down payment within the next 1–2 years, a money market ETF allows you to generate monthly interest while minimizing exposure to market volatility. These funds offer liquidity, stability, and modest income without locking your money away in a GIC.
For long-term, growth-oriented investors, which aligns more closely with the Fool’s focus on wealth building through quality equities, money market ETFs serve a different purpose. They may act as a temporary cash parking tool as a way to hold funds securely while waiting for opportunities to invest in undervalued stocks. They’re also useful for managing cash flows in a portfolio or holding dry powder during uncertain market conditions.
However, the Foolish philosophy is clear: over extended periods, stocks outperform cash. Investors focused on long-term growth should prioritize businesses with durable competitive advantages and strong fundamentals—using money market ETFs only to complement their broader, equity-driven strategies.