Investment Savings Account (ISA) Interest Rates | Page 2 | Investing | Discussion forum

Just notice the USD ISA TDB8152 in now at 2.05% the highest out there and better then eq and simplii

It occurred to me the other day that these investment accounts are probably not CDIC insured, since they are structured as mutual funds. Is that correct?

(I realize most people don't expect the big banks to go under, but would still like to know if I'm right about this.)

OK. Then why do people say they are structured as mutual funds? What is it about them that is mutual fund-ish?

Loonie said
OK. Then why do people say they are structured as mutual funds? What is it about them that is mutual fund-ish?  

I don't know who said they are structured like Mutual Funds but I am very familiar with Scotia ISA DYN6000 and it is definitely covered under CDIC - presently earning 2.30%. DYN6001 is for USD and interest of 2.25%.

Using their ticker you put in an order for them, either buying units or a dollar amount, with cut-off time for current business day, just like for mutual funds. Same for selling.

The ISA's are packaged as if it was a mutual fund.

As AltaRed described, one buys and sells them through the mutual fund system as if they are a mutual fund. They can be available through mutual fund dealers.

They will appear in account statements like a mutual fund with a certain number of units and a quoted price per unit. For example, DYN6000 will show up as a certain number of units held with a value of $1.00 per unit.

It is a clever trick to accept deposits through the mutual fund advisors and dealers.

AltaRed said

Stocks and bonds close in T+2. The ISAs close in T+1. I've always bought the stock or bond before then selling enough ISA units to pay for the purchase. Even if one misses the 'current' business day of the stock/bond purchase, the ISA sale is contracted next business day and the proceeds are available to pay for the stock/bond on T+2.

Exception: Registered accounts where one cannot go 'short' anyway.  

At iTrade, for my Registered Account, I needed to initiate the "sell" part of the ISA funds first, and then the system allowed me to do the purchase of shares/ETFs. The system would not allow me to purchase the shares/ETFs if I did not have sufficient cash balance already available before I initiated the sell of ISA funds.

canadian.100 said

At iTrade, for my Registered Account, I needed to initiate the "sell" part of the ISA funds first, and then the system allowed me to do the purchase of shares/ETFs. The system would not allow me to purchase the shares/ETFs if I did not have sufficient cash balance already available before I initiated the sell of ISA funds.  

As I posted in #37, registered accounts cannot go short by law/regulation, so cash must be available in order to pay for a 'buy'. I have discussed that with Scotia iTrade where I have my registered accounts. Their system cannot recognize the ISA holding as 'cash equivalent' and they didn't seem motivated to resolve that.

I have heard anecdotally the software platforms of a few brokerages, maybe TDDI as one example, recognize that ISAs are "cash equivalents" and will permit a temporary 'technical' short to occur, e.g. a buy to occur before ISA units with T+1 settlement are sold.

Ultimately, it is no big deal to sell ISA units first. One may not get the market price one wants to buy that equity that specific moment of that specific day but it ultimately makes no real difference in the long run. The 'noise' of a purchase price will be forgotten in mere days or weeks. That has been the story of some 20 years of my experience with my RRSP (now RRIF) account.