What to do with your cash

[LOL!]

It seems like the financial writers are reading the forum and writing articles:
Where to Put Your Cash Now - WSJ.com

A Bond Bust Didn't Happen ... Yet - WSJ.com

 

[SkisALot]

44% of my portfolio is in VG Wellesely Adm (VWIAX). My emergency money and cash for investing are in VG Short Term Investment Grade Adm (VFSUX), CD ladders and a savings account that pays 3%. My regular checking account with Capital One pays 1.15%.

What savings account pays 3%?

 

[obgyn65]

I am in the same situation. After reading a few discussion threads on this website, I am now considering more munis when my CDs expire.

I also have a lot of cash in cd's though not coming in for another year. I wonder what to do when it finishes up. I have been looking around and see some at 3% for 60 mos. but thats nothing to write home about.

 

[wcv56]

I am happily in small hedge funds, they can indure up and down cycles much easier than mutual funds and give high returns some years.

My main one is lower risk opened in 2000, has two losing years 2008 -4.5% and 2009
-1%. Up 400% since inception, he is on Fox news cashin show every Saturday, I call it my steady eddy. I think we were above 80% cash early when the crash happened in 2008.... Mutual funds stay 80% invested at all times for most of them anyways IAW
prospectus.

My higher risk one started Sept 06 up 727% since then, no losing years and up 80%
when market crashed in 2008 (Wish I would of known of them before end of 2009).
So far in 2011 up 28% Wahoo Feb was over $100K month and Jan wasn't to shabby short of $100K. I am young enough where I can go back to work so take the ups and downs in stride, which they have had some scares (down -37% Aug 10 up 10.5% end of 2010. They try to make money up and down cycles in the markets which I want.

If you like a steady dividend stock AT has looked good and have said they have steady dividend stream for the next few years....... Utility stock

Different strokes for different folks I would never go back to plain mutual fund investments again, would rather stay money market,,,, JMHO

 

[brewer12345]

wcv, can you tell us about the due diligence you conducted on these funds prior to investing in them? And what ongoing surveillance do you do?

 

[retire@40]

One place I have parked my "extra" cash is good quality stocks that pay between 4% and 7% dividends. I have some cash in stocks that pay higher then 7%, but that is more of a calculated gamble on my part since I went into them knowing there was a risk of the dividend being cut or stopped which could affect the stock price.

I look for long-term historical trends with these stocks. Not a guarantee, but along with what I presently know about the stocks, it's all I have.

The bulk of my true investments are still with long-term mutual funds that I have had for years.

 

[ericm]

cash, what to do

I am in a similar situation, cash from a real estate deal, though not of the same magnitude (dollar amount), coming in soon.

How does this cash fit into your entire financial scheme? For me, it is outside of my big picture financial plan, so I am really torn as to what to do with it, about 40k.

I am considering putting 15k into muni bonds, because overall me exposure there is low, and the other 25k....
- buying a small business franchise that my wife would run (high risk, but much control
- what I know best, agriculture/timber (low risk, but delayed returns, first sign of any dividends at about 5 to 6 years.
- more bonds/munis

 

[modhatter]

Well. Now I'm really confused. When I was young, I would never have thought this as a problem. But here we are. Saved all this dough.......and no where to go.

 

[wcv56]

Brewer
Word of mouth was how I got the info, long time friend that I have talked investing
with over the last 10 years, he works in the office next to them and was a professional bond dealer in his normal working life. Check the Sec site to see if there has been any complaints or infractions. Barrons and I think Kiplingers does an evaluation of hedge funds also. On their fund info will be accounting firm listed who you can also check out and talk to. Once I become an accredited investor I knew I wanted to be in hedge funds as most of your best mutual fund managers would go on their own and start their own funds. They do have funds of hedge funds which you can google. I was warned not to post website before or I would provide info in this post but if someone is interested pm me. Most hedge funds have a minimum amount to join which differs allot from fund to fund, 500K is common for smaller funds and some may only be 100K. There is several thousand hedge funds so look for the style you would like such as long/short which most are, contrarain, large/mid cap, value,
income oriented and several others. Easiest to get a report from one of the big firms that evaluate hedge funds and they have several catogories with the styles of the funds and the managers reputations will also be evaluated also. I hope this helps and as I said IRS does require you are an accredited investor. I cannot say if IRS ever checks to see if you are but you will have to fill out a form that you are and I am not sure IRS ever see's the form but fund manager must keep as they are not allowed to service a non-accredited investor which IRS calls a sophisticated investor.

 

[brewer12345]

Wcv, thanks for the info. I am actually an investment professional and I worked at a small hedge fund for the best part of 4 years, so I am pretty familiar with the industry. I have only been on the inside and was curious how a retail/individual investor would evaluate such funds. I can tell you that the institutional investors in the fund I worked for conducted extremely extensive due diligence (think proctology exam) on at least an annual basis.

I would encourage you to keep close tabs on the funds you are in. At the very least, once a year you should talk to the principals, their external auditor, and their prime broker/custodian. You are playing outside of the world regulated by the SEC so be careful.

 

[jerome len]

depending on your tax bracket, I'd ladder some muni bonds. You can get the after tax interest equal to 6 or 7% interest in long term muni bonds but you do run the risk of interest rates rising. I've been in them for over 10 years and done very well compared to anything else I've invested in. But, there is risk on short term losses.
I look at them as sort of an annuity, I get my interest each month, my taxes are lower and I don't worry about zero interest as we are now getting in money market funds or close to zero taxable interest in short term CDs.

Another choice is high quality dividend stock funds. Vanguard has one that includes stocks that increase their divident each year, I think it pays around 2% but it has a history of increasing dividends so it's like getting a pay raise each year.

Overall all, I share your frustration. I guess we're both lucky to have money to invest, diversify and don't worry........I always say I have my health, my family and my retirement money.......I'm the luckiest guy in the world..... I wish the same for you!

 

[LOL!]

It looks like we stopped talking about where to put our low-risk cash allocation and moved on to high risk return-chasing investments: hedge funds, long-term munis, dividend paying stocks, etc.

Maybe I should mention that you might want to invest in the exchange-traded fund GULF? It's sure to pop higher when the MiddleEast/NorthAfrica settles down.

 

[wcv56]

Each state has a board for CPA's that can be contacted to check for good standing of the persons and firm. Both funds I am in have been in high visibility TV CNBC and FOX Business. I know it is a dog eat dog world out there so DD is a must. I did have
acces to my accountant who helped checking things out for me to include IRS filings
of the funds themself. How Madof got away with using a one/two man accounting firm for a multi billion dollar fund is amazing, how could they not catch it. Of course he did have high level SEC position before to hide behind.

Brewer I thought you had mentioned before you was in the brokerage business.
If a person is qualified as accredited investor they should be smart enough to check out hedge funds even if they do not use them they should be aware of what is available. Performance is where hedge funds make their money and they do have a majority of their own money in the fund along with family money with smaller funds,
at least mine do. That is one of the first things I asked.

 

[brewer12345]

If a person is qualified as accredited investor they should be smart enough to check out hedge funds even if they do not use them they should be aware of what is available.

Certainly that is what the general structure of securities laws assumes. Unfortunately, that is not always the case, as is amply illustrated by all the individuals taken to the cleaners in the Madoff and numerous other ponzi schemes.

I have no particular opinion about your investments or due diligence of same, but I thought it was worth mentioning that you should be sure to stay on top of your hedge fund managers and not just do your DD once and forget about it. I think most hedge fund managers are legitimate and try their darndest to generate the most return they can for their investors (including themselves); I personally know a number of them. But the fact remains that when you are investing outside the protections of the securities laws/SEC you have to be very careful.

 

[wcv56]

Brewer I agree, never can be to safe.
This guy has 700K to do something with, for me that is allot more than safe money unless he has a few mil already in the markets. He should look up David Einhorn,
Jon Paulson and Jim Rogers just to get an idea of hedge funds. I think their Biography should give a bit of a back ground on hedge fund managers. My feelings are they can be safer and enhance once future earnings quite well and they are the tops in field on average ( not all though). So many of the best mutual fund managers of the 90's have their own funds so a big selection out there. Just trying to give the guy a look
at something he may not be familiar with.

 

[nun]

Each state has a board for CPA's that can be contacted to check for good standing of the persons and firm. Both funds I am in have been in high visibility TV CNBC and FOX Business. I know it is a dog eat dog world out there so DD is a must. I did have
acces to my accountant who helped checking things out for me to include IRS filings
of the funds themself. How Madof got away with using a one/two man accounting firm for a multi billion dollar fund is amazing, how could they not catch it. Of course he did have high level SEC position before to hide behind.

Brewer I thought you had mentioned before you was in the brokerage business.
If a person is qualified as accredited investor they should be smart enough to check out hedge funds even if they do not use them they should be aware of what is available. Performance is where hedge funds make their money and they do have a majority of their own money in the fund along with family money with smaller funds,
at least mine do. That is one of the first things I asked.

I'm a "hedgefundphobe" as I don't like the fees, the initial funding requirements, the lack of transparency and I just can't forget LTCM. Also being on TV isn't a reason to invest in something. For me even closed end funds that use leverage are out of bounds. Call me conservative, but a sensible plan for ER should not include anything with the volatility of your hedge funds. Of course this is a personal choice, but one that I would never recommend to a friend....an enemy, maybe.

My question would be what is your plan for ER, why do you need volatile investments like Modern Capital and Cap Pig?

 

[nun]

I am in a similar situation, cash from a real estate deal, though not of the same magnitude (dollar amount), coming in soon.

How does this cash fit into your entire financial scheme? For me, it is outside of my big picture financial plan, so I am really torn as to what to do with it, about 40k.

I am considering putting 15k into muni bonds, because overall me exposure there is low, and the other 25k....
- buying a small business franchise that my wife would run (high risk, but much control
- what I know best, agriculture/timber (low risk, but delayed returns, first sign of any dividends at about 5 to 6 years.
- more bonds/munis

I'll be coming into some money so I'll have to figure out what to do with the cash. For me it's simple. 50% will go to pay down my 4.5% mortgage. This is a guaranteed return and brings ER closer. The rest will go into equity index funds and I'll up my bond allocation in my IRA to bring me back to a 50/50 AA.

 

[frank]

jerome: were do you find the long term munis paying 6 or 7 percent after taxes and what do you mean by short term losses?

 

[RetirementColdHardTruth]

I like to lay freshly minted bills out on the bed and roll around, squealing like a little girl!

I'm in the money....

 

[Dimsumkid]

jerome: were do you find the long term munis paying 6 or 7 percent after taxes and what do you mean by short term losses?

Frank,
I can help with the long term munis, go to fidelity's website:
Fidelity Investments:

then select option, Over 20,000 individual bonds, then under Municipal - New Issue or Secondary. Here's one cusip w/after tax over 7% - 612221T27 (Montclair Township, NJ), there's a couple more. I've seen aft tax over 8% recently for CA munis. I've only bought new issues so far, but these offerings are time sensitive, so they come and go quickly at times. To buy New Issues, you have to be qualified to buy them, minimum asset levels and/or minimum # of trades/year.

 

[jerome len]

jerome: were do you find the long term munis paying 6 or 7 percent after taxes and what do you mean by short term losses?

I'm big in Vanguard funds, both in and outside of California.
Vanguard TE LT bond fund (VWLTX) currently pays 4.23% interest. Since I'm in a combined 40% federal and state tax bracket, that's about the same as 7% on a before tax basis. Past 10 years the fund has earned me an average return of 4.23%......far better than the return on the S&P 500 stock funds.

Our Vanguard California fund (VCITX) pays 4,52%, and in California my tax rate is a combined 45%.

As interest rates increase, bond funds go down in price. Since I'm in it for the long haul I don't worry about interest rate spikes/downturns. I just look at the past 10 years, glad that I was diversified in muni bond funds since they did so much better than stocks. No one knows, however, what the next 10 years will bring so I remain diversified in stocks, REITS and bonds, very happy with that position. Hope this helps.

 

[nun]

I might be stating the obvious but if I had a lot of cash I'd pay off debt. Even a 4.5% mortgage looks good in this interest rate environment. I mean an investment with zero risk and a return of 4.5% beats other guaranteed investments like CDs. If you have absolutely no debt then the previous posts become more applicable.

 

[wcv56]

Nun
I can understand your phobia of hedge funds and you get what you pay for.
At least they do not get a life time pension for running a hedge fund for a couple years like Mutual and CEF's get ( I believe this is correct, read it in prospectus before, maybe it doesn't apply for all though). I like my managers to have the options of being in bonds, stocks (short or long), margin when appropriate or all cash.
Modern Capital ( value based Style) closed in Oct 2009 (up 16% if I remember right). I found a new fund to replace it, high flyer as I have enough in other fund you mentioned (capitalistpig) which has waived the performance fees every year that I have been in it which is several ( more than 5 less than 10).

I like the best bang for the buck and why do you think the big guys use hedge funds
and high wealth mangers do also ( JP Morgan, Goldman sachs and the rest). I could use a push mower but might as well use a riding one if the amount is enough. I believe I have good funds with results that prove it for the most part and that is what counts.

I am retired sitting in Philippines now visiting brother who I bought a little apartment for last year. I have been in 7 countries since last July Thailand where I use to own a house for a few months. I have a condo in Costa Rica on the pacific, Jaco Beach I am not a surfer so will sell it soon. Company I use to work for is asking me do I want to work again for a couple years so think I might do it, a bit bored of travel now, not a must but I always enjoyed work anyways.

 

[brewer12345]

For the record, I use a push mower at home.

 

[nun]

For the record, I use a push mower at home.

Me too. A push mower gets the job done and I don't have the added cost of gasoline and risk of oil prices going through the roof.

wvc56 does your "best bang for the buck" philosophy take risk or a budget into account. If CapitalistPig did a LTCM how would you be set?