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11-24-2021, 12:43 PM
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#1
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Confused about dryer sheets
Join Date: May 2007
Posts: 7
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Cash alternatives
Hi, been struggling with this for a long while.
Current excessive valuations have me holding about 70% cash. We have about a third of that in a 401K stable value fund earning around 2-3%.
Vanguard gives their 401K's a similar option called stable value trust...but nothing for IRA accts so we're forced to be in money market fund making .01%.
Appreciate anyone's help about what to do as a alternative to cash to make maybe 1+ percent. Even M1 Financial pays 1% on their checking acct but I'd prefer to stay in Vanguard if possible.
Thanks.
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11-24-2021, 01:17 PM
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#2
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Full time employment: Posting here.
Join Date: Nov 2016
Location: Fargo
Posts: 989
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I sure hope these "excessive valuations" are low compared to 10 years from now. Or 20. Or longer.
No free lunch today. .5% in an online savings account. Int-Term Treasury Index is what we use. Yes the principal fluctuates in a narrow range. But safe and more return than a money market.
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11-24-2021, 01:28 PM
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#3
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Dryer sheet wannabe
Join Date: Sep 2021
Posts: 22
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I too, get a measly 0.53% ish for my cash. I use Vio Bank because at one time they beat most with something like .65%
I don’t keep monstrous amounts there, but am always looking for better.
I remain very dubious of someone like M1 claiming 1% yield. You do know they are $125 a year to get that rate? I wonder if they have a maximum savings amount that 1% applies to. I also wonder about other fees like closing an account. Reviews don’t seem too friendly to them...seems a little gimmicky
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11-24-2021, 03:00 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2017
Location: City
Posts: 10,351
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Quote:
Originally Posted by feelthefreedom
... Current excessive valuations have me holding about 70% cash. ...
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Reading the quotations here: Taylor Larimore's market timing quotes https://www.bogleheads.org/wiki/Tayl..._timing_quotes always makes me smile.
__________________
Ignoramus et ignorabimus
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11-24-2021, 03:09 PM
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#5
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Thinks s/he gets paid by the post
Join Date: Oct 2017
Posts: 1,157
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Quote:
Originally Posted by OldShooter
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I expected only an idea or two, but instead I got to read 120 wonderful quotes.
Thank you for the timing on this. I am selling some highly appreciated real estate this month and was thinking if I should sit on the sidelines or dollar cost average into Vanguard Total Stock Index Fund, this just reassured me to invest as soon as the cash is available. I am at 52% stock right now and my asset allocation in my plan is 60%. Appreciated real estate skewed me off track a bit and this will get me back on track.
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11-24-2021, 03:16 PM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2010
Posts: 5,912
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We have really cut down on cash.
My perspective is that inflation is running at 4 points. That means that we have to earn 5 points to net 4 after tax, just to break even. This is a mugs game at the moment.
Ten years ago our recommended ratio at retirement was 70 fixed/bonds, 30 percent equity.
Thankfully we punted our replacement bank advisor at that time, moved to another FI, and went with 70 percent equities. Where we are today. The rest is alternatives, bonds, and some income funds. We re-evaluate every six months or so.
But..it depends on how exposed financially one may be exposed to risk.
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11-24-2021, 03:23 PM
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#7
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Recycles dryer sheets
Join Date: Aug 2016
Location: Austin
Posts: 182
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Cash alternatives
Lots of interest in I-Bonds these days. But of course there are limits to how much one can hold ($10k per person per year + $5k in paper bonds with a tax refund). I bought a $10k I-bond this month. I-Bonds are illiquid for a year after purchase but afterwards can easily be liquidated for a penalty of 3-months' interest.
The rest of my cash is sitting in a "high yield" savings account at Citibank earning 0.5%.
Not central to your question but stock valuations have been considered "excessive" for many years but the best time to invest is today, not at some future date when you think share prices will be more reasonable. They may or may not be. Just have to take the plunge and stay invested for the long term.
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11-24-2021, 05:22 PM
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#8
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Full time employment: Posting here.
Join Date: Oct 2020
Posts: 952
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We all have to take risks. By trying so hard to avoid risk of loss in equities, OP is making long term losses to inflation a certainty. That's a much worse outcome on average than a balanced portfolio, especially as the time horizon lengthens.
The quotes OldShooter shared are not just pithy sayings, they are wisdom from the greatest investors.
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11-24-2021, 06:10 PM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2016
Location: Northern Virginia
Posts: 7,586
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T-Mobile Money. 1.00 percent, FDIC insured.
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11-24-2021, 07:11 PM
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#10
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Thinks s/he gets paid by the post
Join Date: May 2019
Posts: 2,816
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Quote:
Originally Posted by feelthefreedom
Hi, been struggling with this for a long while.
Current excessive valuations have me holding about 70% cash. We have about a third of that in a 401K stable value fund earning around 2-3%.
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Yeah, you figure that big stock crash has to hit one of these days.
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11-24-2021, 07:31 PM
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#11
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Recycles dryer sheets
Join Date: Aug 2016
Location: Austin
Posts: 182
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Quote:
Originally Posted by GenXguy
Yeah, you figure that big stock crash has to hit one of these days.
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March 2020 was a great opportunity to jump into the market... I wonder how many fence-sitters actually did. Probably very few.
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11-24-2021, 07:45 PM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2013
Location: Limerick
Posts: 5,655
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The market will drop. The question is how much it will continue to go up before the drop. I’ve heard people calling for a market crash since the last one. I was in stocks then and rode it out. I’ll ride out the next one too. I do have a cash cushion, but am still heavily into stocks.
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11-24-2021, 07:54 PM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2011
Posts: 8,410
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At 6% inflation you're losing a lot of money in cash even at "1+%". (even at 3, 4 or 5% inflation)
__________________
Living well is the best revenge!
Retired @ 52 in 2005
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11-25-2021, 05:20 AM
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#14
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Thinks s/he gets paid by the post
Join Date: Jul 2013
Posts: 1,884
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Quote:
Originally Posted by OldShooter
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+100
OP - it's really simple. Don't time the market.
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11-25-2021, 06:01 AM
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#15
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Full time employment: Posting here.
Join Date: Nov 2008
Location: Louisville
Posts: 601
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There is something now called a "vertical checking account". Those are paying 3+% interest right now. Most require one automatic deposit a month, around 12 debit card transactions a month and one or two more hoops to jump through. If you don't hit every requirement each month, I think you miss that month's interest. Just search online for vertical checking account.
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11-25-2021, 06:49 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,298
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A recurring thread topic with no good answers for the past few years, but understandable in that cash has never been so out of step with inflation. Like others I’m settling for 0.5% at Ally. I’ve been about to put some of it in a high yield fund, bonds held to duration or whatever else - but haven’t pulled the trigger still. There is no decent return cash alternative that I know of with zero principle risk.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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11-25-2021, 06:51 AM
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#17
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Thinks s/he gets paid by the post
Join Date: Nov 2008
Posts: 3,408
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You will get many investment suggestions that will be mostly based on a persons age, financial situation, level of debt, whether retired, if there are children for inheritance, level of comfort, investment experience/success, whether they have reached their goals, etc. As usual there many variables. Determine what yours are and seek out those posts whose advice is closest to your situation.
Looks like this has been your first post so you have some thinking to do and some searches to make through older posts.
Cheers!
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11-25-2021, 07:04 AM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2016
Location: Colorado
Posts: 8,971
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I don’t like the drag of cash though I use a bucket approach. Bucket one is traditionally the cash bucket, but I did it a little different. I built a muni ladder starting about seven years ago when rates were higher. I added to the ladder when muni’s got punched in the face in early 2020. That is my bucket one. Between interest and maturing bonds, I have enough liquidity to fund all our expenses.
The ladder took the place of a pension when we retired in our late 50’s. I have another eight years left on the ladder which takes us into SS. So not much cash, but plenty of cashflow. Bucket two and three remain untouched and have grown substantially.
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11-25-2021, 07:10 AM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,140
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Quote:
Originally Posted by Austin704
March 2020 was a great opportunity to jump into the market... I wonder how many fence-sitters actually did. Probably very few.
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That was extremely short. I only got a few of my tax loss harvesting fund exchanges done.
__________________
Retired since summer 1999.
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11-25-2021, 07:35 AM
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#20
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Thinks s/he gets paid by the post
Join Date: May 2016
Location: Mid-Atlantic
Posts: 2,676
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Quote:
Originally Posted by Dash man
The market will drop. The question is how much it will continue to go up before the drop. I’ve heard people calling for a market crash since the last one. I was in stocks then and rode it out. I’ll ride out the next one too. I do have a cash cushion, but am still heavily into stocks.
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Actually, my question is not how much it will continue to go up before the drop, but how long will it be after the drop before it reaches its previous high? If there's a recession or depression early in my retirement, I plan on just reducing my draws and spending only from the cash/bond portion, and I should have enough to hold me over for decades of a comfortable but simple LBYM lifestyle!
__________________
-Looking to FIRE in the mid-2020s, which would be our mid-50s.
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