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Best way to hold CASH
Old 10-22-2020, 08:25 AM   #1
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Best way to hold CASH

Hello, hope most if not everyone here is healthy. Looks like my Early Retirement is coming up by Christmas this year. Partly my choice, partly my failure, partly bad luck sums it up. I am 46 years old.

Anyhow, I anticipate having at LEAST 2 years living expenses in pure cash but I was wondering how people here hold cash and still get a return on it. To use round numbers......


Expenses for year 1 would be $150k but I need to get to those funds weekly/monthly as to pay regular bills, etc. So i cant put it in a CD obviously.


1.)How do you all do this? I'd like to have the money in account that earns something - even .50% - but that I can freely write checks or withdraw from.

2.)Additional Cash would be on the side to buy the dips. Right now, if I transfer money into my online brokerage it takes 5 days to clear which would mean I'd not be able to buy stock the day I wanted to do. E-Trade has a savings account where I can move money to and from the brokerage account within seconds. But now it pays almost NOTHING.

Again - does anyone know where to park funds.....earn interest.....BUT be able t to get to the funds immediately if one wanted to buy stocks?


Thanks
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Old 10-22-2020, 08:36 AM   #2
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I use and Amex Savings account that pays 0.6% APR and transfers take 24 hours. Your settlement period for stocks is 2 days. I never had issues purchasing bonds though Fidelity and then transferring the funds from Amex. You are limited to 10 transactions per month.
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Old 10-22-2020, 09:06 AM   #3
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Quote:
Originally Posted by MichealKnight View Post
Again - does anyone know where to park funds.....earn interest.....BUT be able t to get to the funds immediately if one wanted to buy stocks?
If you need funds *immediately*, then the cash must be in the brokerage sweep. You might have a MMF that pays a bit more, but then you must sell it and wait (depends on the brokerage).

Also, when you say "interest" I think you mean that the principal cannot be lost. In that case your alternatives are very limited.
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Thanks
Old 10-22-2020, 09:09 AM   #4
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Thanks

Quote:
Originally Posted by Freedom56 View Post
I use and Amex Savings account that pays 0.6% APR and transfers take 24 hours. Your settlement period for stocks is 2 days. I never had issues purchasing bonds though Fidelity and then transferring the funds from Amex. You are limited to 10 transactions per month.
Maybe it's an E-Trade thing then.

Right now I transfer let's say - 100k cash from my savings account, into my E-TRADE account. The new $100k does show in my E-TRADE account, but it takes 5 days to be "available".
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Old 10-22-2020, 09:12 AM   #5
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Ally bank worth a look. Keep one year of cash plus 12 month CDs opened monthly for future monthly income
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Hi Target
Old 10-22-2020, 09:13 AM   #6
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Hi Target

Quote:
Originally Posted by target2019 View Post
If you need funds *immediately*, then the cash must be in the brokerage sweep. You might have a MMF that pays a bit more, but then you must sell it and wait (depends on the brokerage).

Also, when you say "interest" I think you mean that the principal cannot be lost. In that case your alternatives are very limited.

Target, thanks.

Yes, I'd like to have a place that is principle that won't be lost, BUT also pays something more than customary .10%. I will look for the brokerage sweep. I recently saw something on E-trade where it says "allow E-trade to borrow your stocks, and you accrue interest". I thought a sweep account is technically where a bank takes your cash, lends it out, and lets you accrue interest. It was referred to as "overnight sweep account"
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Old 10-22-2020, 09:37 AM   #7
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Quote:
Originally Posted by MichealKnight View Post
Target, thanks.

Yes, I'd like to have a place that is principle that won't be lost, BUT also pays something more than customary .10%. I will look for the brokerage sweep. I recently saw something on E-trade where it says "allow E-trade to borrow your stocks, and you accrue interest". I thought a sweep account is technically where a bank takes your cash, lends it out, and lets you accrue interest. It was referred to as "overnight sweep account"
At Schwab this appears as Cash - aka Bank Sweep Feature. It pays .01% interest.

In the brokerage I also have SWVXX - a money fund paying a whopping .03%

If you're getting a customary .10% that is something very good at this time. I'd be happy with that.
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Old 10-22-2020, 10:13 AM   #8
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I transfer money from my Chase checking account to my Fidelity investment account, the money is available immediately for trading, although it takes some time (probably two days) for the money to arrive.
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Old 10-22-2020, 10:21 AM   #9
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Ally No Penalty CD pays .6% 11 mo term. Transfer monthly to create CD ladder and fund expenses. The 12-18 mo CDs are ~.7%.
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Old 10-22-2020, 10:34 AM   #10
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How long does it take to get money transferred to a bank checking account? I opened an account and would like to transfer more money, but want to be able to have it transferred back within a short period of time, if needed.
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Old 10-22-2020, 11:10 AM   #11
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Using Fidelity's mobile app, I can deposit a check from my MM fund to my brokerage account and it usually clears in a few hours, or less. The "cashed check" shows up in SPAXX and then I can trade away. Last week I deposited a check on Sunday afternoon, and the funds were available to me before the markets opened on Monday, but not until after about 7:00 AM CDT. This doesn't solve your "immediately" requirement, but it's way faster than 5 days.

Note: I learned that, to put in a Market Price buy order, the purchase cannot exceed 95% of your available funds to trade.
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Old 10-22-2020, 11:38 AM   #12
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I have amex and ally both because there is limit transaction for free. But two accounts are enough for the number of transaction. And I have set up those two account with vanguard. So I think i can buy immediately choosing those account from vanguard website when i buy stocks but the transaction is completed later. but I believe the order date is when I ordered.
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Old 10-22-2020, 11:51 AM   #13
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Quote:
Originally Posted by MichealKnight View Post
Hello, hope most if not everyone here is healthy. Looks like my Early Retirement is coming up by Christmas this year. Partly my choice, partly my failure, partly bad luck sums it up. I am 46 years old.

Anyhow, I anticipate having at LEAST 2 years living expenses in pure cash but I was wondering how people here hold cash and still get a return on it. To use round numbers......


Expenses for year 1 would be $150k but I need to get to those funds weekly/monthly as to pay regular bills, etc. So i cant put it in a CD obviously.


1.)How do you all do this? I'd like to have the money in account that earns something - even .50% - but that I can freely write checks or withdraw from.

2.)Additional Cash would be on the side to buy the dips. Right now, if I transfer money into my online brokerage it takes 5 days to clear which would mean I'd not be able to buy stock the day I wanted to do. E-Trade has a savings account where I can move money to and from the brokerage account within seconds. But now it pays almost NOTHING.

Again - does anyone know where to park funds.....earn interest.....BUT be able t to get to the funds immediately if one wanted to buy stocks?


Thanks
I just make prescheduled ACH transfers out of my savings account ( .84% at small.local bank) to my checking account twice a month, just like a paycheck. Savings account refilled with maturing CDs or sales of short-term bond funds.

The ACH transfers are based on my budget which I tend to under-run. But can move money back by ACH transfer when needed.
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Old 10-22-2020, 11:56 AM   #14
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I think your best bet is an online savings account.... we use Discover Bank and last time I looked it was paying 0.6%. IME they are not always the highest but are generally good rates. I then do periodic ACH transfers to the checking account that I use to pay my bills and those transfers take a couple days and are immediately available.

For cash that you won't need for a year or so you might consider Dominion Energy Reliability Investment (currently 1.50-1.75%) or Toyota IncomeDriver Notes (currently 2.00%) but of course those have some credit risk. YMMV.
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Old 10-22-2020, 01:55 PM   #15
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We use Marcus (Goldman Sachs) online savings account (.6% today) for our slush fund. We transfer monthly to the daily checking account to pay the bills and we toss all "hanging around" money in there until needed.

It takes a day or two to transfer. Easy peezy.
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Old 10-22-2020, 02:35 PM   #16
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I would hold cash firmly, using both hands.




Quote:
Originally Posted by MichealKnight View Post
... Additional Cash would be on the side to buy the dips. Right now, if I transfer money into my online brokerage it takes 5 days to clear...
If you have a margin account, you have a bit more leeway. The margin interest is high, but still not much over a few days.
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Thanks to all
Old 10-22-2020, 02:46 PM   #17
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Thanks to all

Thanks everyone....

I want to be efficient with cash, but at the same time I don't want to squirm everytime a bill comes due. So think I'll do something that resembles the following:

For 12 months expenses
********************

3 months expenses in crappy ol' checking account that most of my outflows are tied to anyways. I don't want to mess with monthly transaction limits because I have so many credit cards. (Not for stupid spending. It's for points ho'ing

9 months expenses in either ALLY, Discover, Marcus, earning .60% and I guess, after the 1st 3 months, I'll just keep transferring another 1 to 3 months worth of expenses into checking account depending on how the rhythm goes.


For year #2 expenses
*******************

Perhaps same .60% online account, or perhaps put half in that account, and half in a .85% CD.



Brokerage "buying on the dip" cash
*****************************

Still miffed. Bothers me to leave $100k-$200k getting a paltry .06% or .10% or whatever. I guess I gotta decide if it's worth it. IMO i'd be sacrificing maybe 1% -1.25% by not parking it elsewhere..... and if I feel buying on dips is worth more than 1.25% then perhaps it's worth it?
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Old 10-22-2020, 07:29 PM   #18
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Id used online savings accounts for a month or so of savings. The concern for putting more in one is that rates are in decline whereas CDs let you lock in todays low rates before they go lower.
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Old 10-22-2020, 08:15 PM   #19
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Quote:
Originally Posted by MichealKnight View Post
Brokerage "buying on the dip" cash
*****************************

Still miffed. Bothers me to leave $100k-$200k getting a paltry .06% or .10% or whatever. I guess I gotta decide if it's worth it. IMO i'd be sacrificing maybe 1% -1.25% by not parking it elsewhere..... and if I feel buying on dips is worth more than 1.25% then perhaps it's worth it?
As I mentioned earlier, if you have a margin account your brokerage will loan you money to buy stocks. The interest they charge is high, but you only pay that for the few days while you move fresh money into the account to pay that off.

I have not had to use margin recently, but here's what Schwab charges.

$0-24,999 - 8.325%
$25K-49,999 - 7.825%
...
$100K-249,999 - 6.825%

For a loan of $250K, the interest over 5 days is $234. That's about the same as your 0.1% interest for a full year.

The margin interest you pay is tax deductible as an investment expense.

How much they will loan you is a function of your account balance. They need the rest of the account as collateral. They typically let you borrow $0.50 for each $1 you have in the account.
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