Where Do You Park Your Cash These Days?

[mrfeh]

What’s the downside/risk to investing some idle money in bond fund like PRFHX? Assuming this is clearly idle money not part of taxable or non-taxable equity investments. I feel like it’d be a good diversification from my equity and real estate investments.

Language/definitions are important here. IMO, "investing idle money" is not the same as "parking cash".

First order of business is deciding when the money will be needed, and if a decrease in value is acceptable between now and then.

 

[Pete10k]

We keep 9 months of living expenses in vteb, (vanguard tax-free muni bond etf) which yields around 2% today but I’ve owned it since I retired in Feb ‘19 when it was yielding over 2.2%. The equivalent taxable etf from vanguard is vcsh. Low expenses and slight capital appreciation. Steady as she goes. Definitely got my attention on 3/19/2020 when the credit markets froze up for a few days. Glad to be in dividend paying stocks that day. Shut off the news, poured a cocktail and figured this HAS to be the bottom for stocks. Didn’t have the balls to buy anything but luckily didn’t sell anything. Hindsight is 20/20.

 

[Pete10k]

Au contraire I believe parking cash IS an investment decision not to take investment risk. LOL

 

[Pete10k]

Language/definitions are important here. IMO, "investing idle money" is not the same as "parking cash".

First order of business is deciding when the money will be needed, and if a decrease in value is acceptable between now and then.

Au contraire , I believe parking cash IS an investment decision not to take investment risk. LOL

 

[24601NoMore]

We keep 9 months of living expenses in vteb, (vanguard tax-free muni bond etf) which yields around 2% today

Looked interesting but the duration appears to currently be over 5..isn't that pretty risky with where things are currently at on rates?

I've been pleased with BBBMX BBH Limited Duration.

I've been in it for the last 4 years. Over that time it has consistently been in Morningstar's top quartile, with very steady 2-3% total returns. Even for 2020, despite the usual drop wrt the COVID black swan event.

Thanks for the lead..pretty compelling performance and yield, and a duration of slightly less than 1. Not familiar with the fund company but they look fairly small. I got burned on some "boutique" funds / star managers in the past, though (Berwyn Income), so took a look at what PIMCO has that's in the same Ultra-Short category and found PTSHX. The M* report says the following about it's focus.. "This ultrashort-bond strategy's aims are modest: Provide slightly better-than-cash returns while preserving capital". Duration of only 0.13 (!!)..TTM yield of 1.64%. Portfolio weighted coupon of 1.82%. It beat BBBMX in a few years, although BBBMX usually beats PTSHX. But BBBMX appears to take a lot more credit risk with an average portfolio rating of BBB. M* isn't showing what the PIMCO average debt rating is, but based on the portfolio details it looks to be a bit higher on the credit quality. Standard deviation is only around .5 higher with BBBMX.

Both look to be good options. I'd be tempted to pickup some BBBMX and roll the dice with the smaller firm (and all that goes along with that including more reliance on star performers, fewer analysts, less bench, etc) but memories of BERIX make me lean toward the PIMCO offering..unfortunately, unless you can find PTSHX anywhere with a lower minimum, the best option I'm aware of is VG at $25K min compared to $5K min with BBBMX.

 

[Chuckanut]

The wealthiest man in America even agrees.

This is a huge logical fallacy, and I bet it has some fancy Latin name.

I have great admiration for Mr. Musk. But, he did not become the wealthiest man in the world by investing in crypto currencies. He worked hard and took some very big risks. He also figured out where the Feds where willing to lend a hand. Ask his advice on rockets and EV's. Crypto? Not so much.

If I Were A Rich Man from Fiddler on the Roof.....

The most important men in town would come to fawn on me
They would ask me to advise them
Like a Solomon the Wise
"If you please, Reb Tevye..."
"Pardon me, Reb Tevye..."
Posing problems that would cross a rabbi's eyes
Ya-da-dee-da-da, Ya-da-dee-da
And it won't make one bit of difference if I answer right or wrong
When you're rich, they think you really know

 

[OldShooter]

I've been pleased with BBBMX BBH Limited Duration.

I've been in it for the last 4 years. Over that time it has consistently been in Morningstar's top quartile, with very steady 2-3% total returns. Even for 2020, despite the usual drop wrt the COVID black swan event.

Thanks for the point-out. You may have pushed me off my slothful MM funds. Actually, in looking at BBBMX I found the similar VG fund VUBFX which has expenses of only 20bps. I will try one or the other.

 

[Mauser]

Got several 1.65% Ally CDs coming due this year. I might try to do some bank bonus opportunities, but other than that I'll probably just throw the money back into Ally MM - or maybe another No Penalty CD. With rates at .5%, you're talking just a few bucks a year chasing the extra $$. Not worth it.

I hear ya, and I am tempted to agree - but I won't. I guess it all depends on how much "cash" you have to park, and what you think is "worth it".

I have $300,000, and that extra 0.5% I am now getting by just moving my cash from Ford demand notes to Toyota demand notes will give me $1,500 more free money this year (assuming nothing else changes, of course).

For me, $1,500 is certainly "worth it" to just sign on and hit the transfer button on the account.

 

[Pete10k]

Looked interesting but the duration appears to currently be over 5..isn't that pretty risky with where things are currently at on rates?

Perhaps, but I find it interesting that as the 10 year rate has increased over the last month the price of vteb has actually also increased by 3/4%. I would expect the price to go down with the inverse relationship between rates and bond prices.

That being said with a 5 yr duration I’d expect the price of vteb to decrease 5% for every 1% in interest rates. In this environment however perhaps the etf price is increasing because of the extreme search for yield by many investors. additionally I don’t think the Fed can let rates go much higher because the US would have to print even MORE money to pay the debt obligations which are already abhorrent! GLTA

 

[stephenson]

Fidelity muni MMF - terrible, but ...

Gave up playing bonds, CD options near zero, so bought a lot of ATT at about 7.5% dividend.

Pretty stable stock price, relative to others in the same range of dividends.

Company likely to come out of satellite broadcast funk at some point, so some upside, perhaps, at that point.

 

[Helen]

Looked interesting but the duration appears to currently be over 5..isn't that pretty risky with where things are currently at on rates?

It also took a hit last Feb. from ~$55 to ~$45 per share. Was that from panic selling?

I have cash that I'd like to move into stock index ETFs, but I'm not sure I want to do it at these levels. There really isn't a stable investment that pays much. From what I saw from the drop last Feb., bond funds moved in sync with stocks.

 

[Poweruser]

I have mine in the following:

1. Stable Value fund
2. Vanguard Total Bond Fund
3. I-Bonds
4. Ally CD's - both no penalty and a couple of 12 and 13 months


The CD's are expiring over the next 6 months. I'm considering a 3 and 4 year MYGA ladder with part of the proceeds if the interest rates are attractive in April.

 

[24601NoMore]

I'm going to give PIMCO Short-Term a try..it has a duration of 0.13 (!) and TTM yield of 1.64%. Has done > 2.3% avg annual return last 1, 3 and 5 year periods. Slightly under 2% (1.89%) avg/yr last 10 years..and 2.5 avg annual for the past 15. High ER, but those performance numbers are obviously net of ER..

Hard to beat PIMCO when it comes to Fixed Income. And in my experience, active management usually beats passive on Fixed Income as well (obviously opposite that when it comes to Equities)..

 

[pb4uski]

Looks like PTSHX is Institutional. Looks like current distribution yield is only 0.60% and SEC yield is only 0.41%.

https://www.pimco.com/en-us/investments/mutual-funds/short-term-fund/inst

 

[ownyourfuture]

Fidelity muni MMF - terrible, but ...

Gave up playing bonds, CD options near zero, so bought a lot of ATT at about 7.5% dividend.

Pretty stable stock price, relative to others in the same range of dividends.

AT&T stock is just absolutely awful. A four-year annualized return of -3.24%
In spite of that, I did the same thing. Back in December, I added a small amount in my HSA with cash that's 'earning' 0.01

I chose to take the dividends in cash, & the shares have appreciated 1.16%
116 times better than the cash

If it literally only returned that amount annually, I'd be happy.
It truly is bizarro world when it comes to interest rates!

 

[Ready]

I had a 30 month CD at Freedom Credit Union at 3.5% that just expired yesterday. Without sending me any kind of reminder they automatically renewed it for another 30 months at 1.3%. I think I’m just going to cash out and move the money to municipal bonds. But I was surprised to see them offering me 1.3%. The highest I could find on bankrate was around 1.15% and that was for a six year CD.

 

[RunningBum]

Thanks for the point-out. You may have pushed me off my slothful MM funds. Actually, in looking at BBBMX I found the similar VG fund VUBFX which has expenses of only 20bps. I will try one or the other.

Admiral shares (VUSFX) are even lower at 0.10% expenses.

 

[Montecfo]

AT&T stock is just absolutely awful. A four-year annualized return of -3.24%
In spite of that, I did the same thing. Back in December, I added a small amount in my HSA with cash that's 'earning' 0.01

I chose to take the dividends in cash, & the shares have appreciated 1.16%
116 times better than the cash

If it literally only returned that amount annually, I'd be happy.
It truly is bizarro world when it comes to interest rates!

I have taken a few round trips in ATT, buying in 27-8 range, selling north of 30. Just closed out in fact right after earnings.

Good intermediate term trade but I do not view it as a cash alternative.

 

[jazz4cash]

Fidelity muni MMF - terrible, but ...



.

Mind sharing the symbol? I didn’t think they had a muni MM fund (I looked). And isn’t EVERYTHING terrible these days anyway?

 

[stephenson]

mind sharing the symbol? I didn’t think they had a muni mm fund (i looked). And isn’t everything terrible these days anyway?

ftexx

 

[24601NoMore]

Looks like PTSHX is Institutional. Looks like current distribution yield is only 0.60% and SEC yield is only 0.41%.

https://www.pimco.com/en-us/investments/mutual-funds/short-term-fund/inst

Yes - it's Institutional. Typically $1M minimum for that reason, BUT available at Vanguard (and perhaps elsewhere) for a $25K min.

The weighted coupon of the portfolio (per Morningstar) is 1.82%. What it will pay out depends of course partially on inflows and outflows and the manager's need to manage their cash accordingly..

All that said, I'm not convinced that a Fixed Income fund's total return for a year will only be it's yield. If you look at any FI fund even during periods of high inflation (eg: from PortfolioVisualizer), many FI funds have total return much higher than their yield. For example - PV shows inflation being 4.08% in 2007, and PTSHX still returned 4.55%. Or, 1996..3.32% inflation with 7% TR.

I also read a good analysis yesterday on BH that made a lot of sense..a short-term bond fund will be buying higher yield bonds when rates rise (ie: when old bonds mature). For that reason, as rates rise - yields will rise. Contrast that with a mid or long term bond fund that does not have maturing bonds to replace..

YMMV, but with a 1, 3, 5 and 15 year total return north of 2.3%, I'm hopeful that this is a solid choice, especially given the incredibly short duration of 0.13. The managers will need to constantly replace maturing bonds - so as rates rise, it's likely that yield will rise. But even with that, the PIMCO guys seem to find a way to get decent TR even in periods of higher inflation..guess we'll see how it does in the months and years ahead but I like the track record even in those years when inflation was higher..

 

[OldShooter]

Admiral shares (VUSFX) are even lower at 0.10% expenses.

Thanks but Schwab lists it as "Institutional Customers Only." Kind of like Olden Times when all Admiral class shares were unavailable through Schwab. It is available directly at VG, $50K minimum, but like others here I am not interested in chasing the basis points to the point of opening accounts and moving money.

Thanks, though.

 

[RunningBum]

Thanks but Schwab lists it as "Institutional Customers Only." Kind of like Olden Times when all Admiral class shares were unavailable through Schwab. It is available directly at VG, $50K minimum, but like others here I am not interested in chasing the basis points to the point of opening accounts and moving money.

Ah, ok. My investments are mostly at Vanguard so this admiral investments are available to me. I forget that some consider buying VG funds from other brokerages.

 

[jazz4cash]

ftexx

Thanks...yup, terrible. Can't decide if this is something I can use at all. I was trying to use a single state muni fund that pays ~2.5 which is great. I thought I could avoid some gains/losses with a MM muni instead, but maybe not.

 

[HawkeyeNFO]

Thanks for posting this link vchan.....

Here is a link to the Federal Reserve policy on their objective to achieve 2% inflation.

https://www.federalreserve.gov/faqs/economy_14400.htm

After reading it here, it makes me wonder why people continue to argue about what the Fed's intent is. Not saying I believe everything the gov't says, but c'mon people!

"If inflation expectations fall, interest rates would decline too. In turn, there would be less room to cut interest rates to boost employment during an economic downturn. Evidence from around the world suggests that once this problem sets in, it can be very difficult to overcome. To address this challenge, following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation modestly above 2 percent for some time."