Where Do You Park Your Cash These Days?

[stephenson]

While certainly not a bond type product, I have been using ATT (T) as a place to store unneeded funds - dividend a bit over 7% with low volatility, even with the upcoming spin off of Warner (there may be a small pot of copper at the end of the process).

 

[OldShooter]

... The only CDs I have access to in my IRA are brokered through Schwab unless I pull the money out and pay ordinary income tax on it which is not what I want to do with the funds.

Actually, no. I would never hassle with this (though @PB4 will consider it to be trivially easy) but you can open an IRA at whatever bank you like and transfer custodian-to-custodian by filling out a simple form at the receiving bank. You could even get a check from Schwab and deposit in the new IRA, subject to time limits (90 days??) on the rollover.

 

[Montecfo]

TMobile Money. 1 percent minimum. That's where my ST cash is now (Other than 3 percent plus CDs with a lot of term left).

For IRA I like rayvt's ideas, RPHIX(ultralow duration bond fund), FRA ( bank loan CEF), MERFX (alternative equity fund, low beta).

 

[pb4uski]

Thanks for the suggestions for bank CDs, but as I said in my post, the $250 K is in my IRA.

The only CDs I have access to in my IRA are brokered through Schwab unless I pull the money out and pay ordinary income tax on it which is not what I want to do with the funds.

You can set up a tIRA with the bank and then transfer funds from your Schwab tIRA to the bank to fund the CD... I've done this several times to take advantage of CD rate specials back when I could get 3.0% or 3.5% for a 5 year CD. It's a small hassle but I only need to do it every 5 years. Since you are transferring money between tIRAs at different financial institutions then not a taxable event.

In fact, you could even just get a check and then deposit it at the new bank in a tIRA within 60 days and would be ok... but you can only do transfers like that once a year.

Since the FDIC or NCUA limit is $250k you should be all set unless you insist on 100% coverage, in whihc case you'll need tIRA accounts at two different banks.

 

[pb4uski]

Actually, no. I would never hassle with this (though @PB4 will consider it to be trivially easy) but you can open an IRA at whatever bank you like and transfer custodian-to-custodian by filling out a simple form at the receiving bank. You could even get a check from Schwab and deposit in the new IRA, subject to time limits (90 days??) on the rollover.

Yes, it is worth the hassle to me.

$250k at 3% for 5 years.... $289,819
$250k at 1% for 5 years.....$262,753

Difference.... $27,066 for a couple hours of "work"

Now that was back in 2019.... today it is hard to find that much of a rate difference.... but even 1.7% vs .7% would be $13,112... not bad for a couple hours work.

 

[aja8888]

Actually, no. I would never hassle with this (though @PB4 will consider it to be trivially easy) but you can open an IRA at whatever bank you like and transfer custodian-to-custodian by filling out a simple form at the receiving bank. You could even get a check from Schwab and deposit in the new IRA, subject to time limits (90 days??) on the rollover.

The $250 K came from Pen Fed as an IRA CD account (cashed out 3%'ers) transfer. I really don't want to do that again. I'm consolidating retirement funds at Schwab for simplicity. I have been a Schwab client for 38 straight years.

 

[aja8888]

While certainly not a bond type product, I have been using ATT (T) as a place to store unneeded funds - dividend a bit over 7% with low volatility, even with the upcoming spin off of Warner (there may be a small pot of copper at the end of the process).

T has been my cash covered put option trade in my IRA. I've sold hundreds of contracts and occasionally get the shares put to me. Then I sell covered calls to get rid of them. Since T fluctuates between 27 and $34, I have made a game of this and pocketed $1,000's in premiums.

I don't care to hold T long term and the 7% div is a going to be cut in half after the new deal closes in 2022. But thanks for the idea anyway.

 

[Golden sunsets]

FLRN (SPDR Bloomberg Barclays Investment Grade Floating Rate ETF)
Current yield 0.68%

or FLOT(iShares Floating Rate Bond ETF)
Current yield 0.71%

Low volatility aside from a glitch in March 2020. You want to keep the duration low.

These are where I keep my IRA cash, since the broker's cash rate is like 0.01%.

Other than that, Alliant CU pays 0.55% in savings account, but you can't really do that with an IRA.

What am I doing wrong. Morningstar tells me that the SEC yield on FLOT is .15% and on FLRN, the SEC yield is .21%. Both better than .01, but not a windfall.

 

[OldShooter]

The $250 K came from Pen Fed as an IRA CD account (cashed out 3%'ers) transfer. I really don't want to do that again. I'm consolidating retirement funds at Schwab for simplicity. I have been a Schwab client for 38 straight years.

As I said, I would not hassle with moving money around chasing CD yields, but your statement was factually incorrect. It would not be necessary to pay taxes/take a distribution just to buy a CD outside Schwab.

 

[aja8888]

As I said, I would not hassle with moving money around chasing CD yields, but your statement was factually incorrect. It would not be necessary to pay taxes/take a distribution just to buy a CD outside Schwab.

It is if I take the funds out of the IRA as a "distribution" (make it ordinary income through the pulling out of the IRA) and buy a CD outside of an IRA. I really don't care to move any funds from my Schwab IRA for any reason, and I stated that in an above post.

I take a Roth conversion annually and that's it besides my typical RMD pull, in which both actions are taxable.

I was looking for suggestions as to a better way to invest $250 K within the IRA as a fixed income instrument and not using equities, and I used a treasury bond ladder as my example. What was suggested (a couple of ETFs and bond funds) really are not much better than the treasury ladder. I'll just stick with that ladder as it is simple to set up and fills the need for 5 years. Plus, it is very safe unless the FED and Treasury explode.

 

[pb4uski]

Fine, but you should have been more specific that you wanted to keep your Schwab tIRA and would not transfer money to another tIRA in your initial ask.

Given that, I don't have much of a better idea other than dipping into higher rated preferred stocks. Schwab has a pretty good preferred stocks screener that I use or some of their fixed income specialists might be able to put a portfolio together for you. I have 50 tickers that I've bought over the past 24 months and my investment grade holdings yield about 5.5%.

A few examples... CBKLP is rated BBB+ and yields 5.95%, GL-C is rated BBB+ and yields 6.09%, PUK.PR is rated BBB+ and yields 6.13%. If you do delve into these be sure look at call risk.

Or you could try investment-grade corporate bonds and let Schwab's bond desk build you a portfolio.

Or you could look at the muni bond target maturity funds like Bulletshares... a 5-year ladder with funds terminating in 2022-2026 would yield 1.6% and have a 3.57 duration. Or you could just buy the 2024 fund... BSMO... which is yielding 1.4% with a 3.36 duration.

Rather than start a new thread.....In my IRA I have $250 K in cash just sitting there. I want to get it paying better than 0.01% (LOL). I was looking at a treasury bond ladder of 5 years with would pay out 0.47% or about $5600 per year cash flow per year for 5 years. I think some of that cash flow is accrued divs that came with the purchase of the bonds. The bond ave duration is 3 years in the ladder and the coupons are about 2.1%.

This is money from matured CD's. I have enough in stocks and I am looking at this as part of my fixed income bundle.

Anybody got a better idea?

Oh, I am almost 77 so no real long term stuff is on my radar.

 

[rayvt]

VCSH is another one to consider. Higher yield and lower costs than FLOT.

Another one I considered. But:
VCSH,
Average effective maturity = 3.0 years
Average duration = 2.8 years

I wanted something that was more like a bank savings account. That is, lower interest rate risk, which means short duration.
FLRN holds floating-rate notes that mature in five years or less, a majority of which are based on the 3-month LIBOR. As would be expected from a portfolio of floating-rate notes, the fund has minimal exposure to interest-rate move.

FLRN & FLOT effective duration is 0.11 years.

I like the higher yield of VCSH, but made my final decision based on what my original goal was --- a fund that had a risk-level like cash.

 

[mrfeh]

Great tip, thanks @rayvt

I've used floating rate (aka bank loan) funds in the past, and have recently investigated them, in an effort to increase yield.

I think they can be useful for a portion of fixed income holdings. But know that their expense ratios tend to be high, and they will drop in NAV if there is an economic shock; in other words, they tend to have some correlation with equities.

 

[aja8888]

Fine, but you should have been more specific that you wanted to keep your Schwab tIRA and would not transfer money to another tIRA in your initial ask.

Given that, I don't have much of a better idea other than dipping into higher rated preferred stocks. Schwab has a pretty good preferred stocks screener that I use or some of their fixed income specialists might be able to put a portfolio together for you. I have 50 tickers that I've bought over the past 24 months and my investment grade holdings yield about 5.5%.

A few examples... CBKLP is rated BBB+ and yields 5.95%, GL-C is rated BBB+ and yields 6.09%, PUK.PR is rated BBB+ and yields 6.13%. If you do delve into these be sure look at call risk.

Or you could try investment-grade corporate bonds and let Schwab's bond desk build you a portfolio.

Or you could look at the muni bond target maturity funds like Bulletshares... a 5-year ladder with funds terminating in 2022-2026 would yield 1.6% and have a 3.57 duration. Or you could just buy the 2024 fund... BSMO... which is yielding 1.4% with a 3.36 duration.

Thanks for the tip on Bulletshares. I remember you bought some a few years ago...correct? That yield is much better than the T Bills.

I already have a dozen or so preferred stocks and add to those in downturns.

 

[rayvt]

AT&T, preferred stocks, cash covered put options, moving money around chasing CD yields, munis with 3.5 duration.....

These are all investments, not really places to park cash. Face it, there are no good fixed-income choices these days. To get a meaningful yield you have to put the money in something that has a higher risk.

The problem with CD's is that they lock up your money for the duration.

OP said "This is money from matured CD's. I am looking at this as part of my fixed income bundle."
In my experience, moving your money around to different banks to pick up a few more basis points is not worth the effort. Too much hassle for too little reward.

I have never bothered to look at things like a treasury ladder, just figured it would not interest me. But the OP's comment "treasury ladder. I'll just stick with that ladder as it is simple to set up and fills the need for 5 years" sent me to google. Schwab has a "CD & Treasury Ladder Builder" tool. They have a predefined 5 Year ladder.

5 yr CD ladder avg APY is 0.49%
5 yr Treasury ladder avg APY is 0.51%

FLRN or FLOT yield about the same and your money is not locked in.

--------------
RPHIX (RiverPark Short Term High Yield Fund Class Institutional)
Please.
"High Yield" means junk bonds ("exposure to junk-rated credits rose to 79% in December 2020")
"Institutional" .. minimum investment $100,000

FRA (BlackRock Float Rate Strat) An interesting CEF, 6.4% discount to NAV. Distr rate 6.11%. Clearly not your typical fixed income investment!
The distribution rate at NAV is 5.72%, which is not sustainable.
Indeed the NAV was 20.00 in 2003 and is 14.00 today.

 

[Montecfo]

--------------
RPHIX (RiverPark Short Term High Yield Fund Class Institutional)
Please.
"High Yield" means junk bonds ("exposure to junk-rated credits rose to 79% in December 2020")
"Institutional" .. minimum investment $100,000

If interested you should read the Morningstar. This is not your typical junk bond fund. It is small and very low duration (90-120 days or so). They buy small issues after heavy research convinces them the issue will be funded at maturity or redemption. It is a very steady fund and low duration means very little rate risk. Investor class is RPHYX, minimum a few thousand. Yields around 2%.

FRA (BlackRock Float Rate Strat) An interesting CEF, 6.4% discount to NAV. Distr rate 6.11%. Clearly not your typical fixed income investment!
The distribution rate at NAV is 5.72%, which is not sustainable.
Indeed the NAV was 20.00 in 2003 and is 14.00 today.

It is a tactical investment for the current environment. Bank loan fund with credit risk, but little interest rate risk because of floating rate terms. And the credit risk seems manageable in this unique environment with growing economy and compliant Fed. And at a discount to NAV. I began buying it in January and it is up 8 percent this year-to-date in addition to the 5-6 percent yield.

 

[sengsational]

What am I doing wrong. Morningstar tells me that the SEC yield on FLOT is .15% and on FLRN, the SEC yield is .21%. Both better than .01, but not a windfall.

So, yeah, is the 0.7% what you'd get, or what you might get?

 

[audreyh1]

What am I doing wrong. Morningstar tells me that the SEC yield on FLOT is .15% and on FLRN, the SEC yield is .21%. Both better than .01, but not a windfall.

Why accept such paltry yields in volatile and risky credit investments when you can get 0.5% or better FDIC insured in a high yield savings account or short-term CD?

As you can see here the FLOT dividend yield is dropping, dropping, dropping. https://ycharts.com/companies/FLOT/dividend_yield

So, yeah, is the 0.7% what you'd get, or what you might get?

It’s what you used to get, in the past.

 

[Montecfo]

yes. Why do paltry with inflation at 4-6 pct?

 

[jazz4cash]

My single state muni fund NAV has ticked up a tad lately. It still throws off 2% distribution yield which is tax-free to me. Not bad. Still have some 3.7 and 3% add on CDs for maturing CDs so I will allocate among these 3 options.

 

[DangerDad]

VUSFX — Vanguard Ultra-Short-Term Bond Fund

Cheers,
DangerDad

 

[rayvt]

VUSFX — Vanguard Ultra-Short-Term Bond Fund

Interesting, but Vanguard says "Because the Ultra-Short-Term Bond Fund will subject investors to principal risk, the fund shouldn’t be viewed as a substitute for a money market fund."

Sadly, there just aren't any good options these days.

 

[DangerDad]

Interesting, but Vanguard says "Because the Ultra-Short-Term Bond Fund will subject investors to principal risk, the fund shouldn’t be viewed as a substitute for a money market fund."

Sadly, there just aren't any good options these days.

Yup—I saw that before I invested. The principle risk is very small but not zero. For me that small risk is acceptable. Perhaps for you it isn’t.
Cheers,
DangerDad

 

[RobbieB]

I just park my cash in checking / savings at the bank, about a year's worth. Get a whole tenth of a percent. I don't care, it's there to spend anyway.

The market makes me dough, the bonds are for stability and the cash is to blow.

 

[Timeisprecious]

Personally, I've given up chasing around a few basis points for my cash. I tell myself the low return is the price I pay for FDIC safety; kind of like paying for insurance.

+1. We're currently getting 0.57% at Vio Bank with FDIC protection.