What would you do with 250K in cash?

[rayinpenn]

Not that I am watching anything but long term dividend income streams but

Clearly interest rate swings could adversely affect prices - put simply if CDs were paying 6% why would I buy a utility fund with a 4% yield? Inflation could also temporarily affect prices...
None of which you or I can predict or control.



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[target2019]

On Vanguard's website, when you research any fund they display a "risk potential" graph, illustrating the relative risk of the particular fund.

For example, the money market fund (VMMXX) gets a #1, all the way to the left, which means "less risk, less reward"...

The VPU gets the opposite ranking, all of the way to the right "More risk, more reward" which is the highest risk potential grade they give.

The STAR fund which is a collection of indexed funds, allocated 60-40 stock-bond, gets a rating right in the middle,half-way.

So this may not mean it's "high risk" compared to betting on horses, or penny-stocks, but relative to other conservative investments.

The question I mean to ask is this: to what market circumstances is this fund exposed to risk? What makes public utility stocks go up, or down?

Yes, more risk more reward, but not high risk. My previous post pointed to that. The red warning bubble on VG site for this sector is not as useful as, say, a purple bubble. It also must be true that over time this rating changes. At this moment in time, with the constant badgering of investors with interest rate "threats" the attractiveness of utilities has waned. What color would that bubble be at the depth of the great recession? It would still not slide as far to the left as VG MM, but I don't think it would be at level 5 with a red bubble.

If you search public utility sector, as with all sectors there is too much information to digest. However, start with Fidelity or Schwab, just because I am a little familiar with the sites, you'd find at least a day's reading on the sector.

I start here when I want to read about a sector:

https://eresearch.fidelity.com/eresearch/markets_sectors/sectors/sectors_in_market.jhtml


Any prospectus would also give you detail about market factors for that investment.

 

[target2019]

Not that I am watching anything but long term dividend income streams but

Clearly interest rate swings could adversely affect prices - put simply if CDs were paying 6% why would I buy a utility fund with a 4% yield? Inflation could also temporarily affect prices...
None of which you or I can predict or control.

Another factor that pops up is a particular utility's investment pattern. Shied away from coal, built a nuclear plant that will not start when you push the button, or went whole hog into coal!

Your simplification of utility yield vs CD yield is the one factor I hear in most articles.

My deep analysis is to invest in DUK and SO, as the south is expanding, it's really hot, and consumers need A/C, computers, and internet in retirement...

 

[Tushar]

In India, you may put the excess cash safe and earn tax free returns by investing in tax free bonds which are currently yielding about 7.5% tax free returns. They are for 10 to 20 years. Easy liquidity as these can be traded in secondary market.

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[rayinpenn]

My deep analysis is to invest in DUK and SO, as the south is expanding, it's really hot, and consumers need A/C, computers, and internet in retirement...

Sometimes keeping it simple is the way to go. We've owned Southern company so long that I had to turn the dividend reinvestment off. It was just too much concentration risk. There's nothing like those quarterly dividends year after year. LUV it.


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[eta2020]

On Vanguard's website, when you research any fund they display a "risk potential" graph, illustrating the relative risk of the particular fund.

That works over a short period of time.
Over the long period of time Cash is most risky investment and Equities are least risky.

 

[target2019]

To answer the OP question, with 250K in cash over and above my well designed portfolio, I would invest in utilities, energy, Healthcare, technology and telecom sectors. Would identify 2 companies in each sector and take a year or two to invest.

 

[Mulligan]

On Vanguard's website, when you research any fund they display a "risk potential" graph, illustrating the relative risk of the particular fund.



For example, the money market fund (VMMXX) gets a #1, all the way to the left, which means "less risk, less reward"...



The VPU gets the opposite ranking, all of the way to the right "More risk, more reward" which is the highest risk potential grade they give.



The STAR fund which is a collection of indexed funds, allocated 60-40 stock-bond, gets a rating right in the middle,half-way.



So this may not mean it's "high risk" compared to betting on horses, or penny-stocks, but relative to other conservative investments.



The question I mean to ask is this: to what market circumstances is this fund exposed to risk? What makes public utility stocks go up, or down?

Utility stocks are tethered to bond yields from 2 different angles. They do compete with bond proxies in the marketplace so when bond yields rise, utilities can fall. But the other side is the borrowing costs of utilities. Typically 50% of capital structure is tied into debt. Debt is more expensive when rates rise thus profits can decline.
Electric Utilities are not the slam dunk safety of yesteryear...Deregulation, rates for power producers less reliable, electrical growth rates nearing zero through efficiency programs, and solar usage. "Stranded assets" could be a problem in the future.
Personally around 70-80% of my entire money is in Utility preferred stocks, not common stock. Those dividends yield about 50% higher than common ute stock dividends, plus they are higher safety in payout.
Plus as an additional measure of security most of mine are in transmission and distribution utilities that do not own or produce power. Although I own a small amount of one common stock utility, and am big into electric utilities for high yield, I have no interest in a utility common stock index fund.


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[HadEnuff]

Thanks, all, for the information. I appreciate it.

 

[Drake3287]

I'm in almost the same position. Full 100% pension that I can easily live off the rest of my life, a million in various stock investments, but I also have $250,000 in cash that I keep in various bank accounts collecting a whopping 1%.

Some people might think I'm crazy but I know that $250,000. will always be there.

 

[Mulligan]

I'm in almost the same position. Full 100% pension that I can easily live off the rest of my life, a million in various stock investments, but I also have $250,000 in cash that I keep in various bank accounts collecting a whopping 1%.



Some people might think I'm crazy but I know that $250,000. will always be there.

Sounds like a very prudent plan to me. Its not like inflation is running 20% while you are collecting that 1% on the extra funds.


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[W2R]

What would I do? Well, bear in mind that I am not one to chase yield. Here is a nice, dull, boring allocation for it, guaranteed to put you to sleep, but also to allow you to do nothing so you can get back to enjoying life:

$60,000 VBTLX Vanguard Total Bond Market Index Fund
$90,000 VWIAX Vanguard Wellesley
$62,500 VTSAX Vanguard Total Stock Market Index Fund
$37,500 VFWAX Vanguard All-World Ex-US Index Fund

 

[ESRwannabe]

Id keep 150 in cash as I like 3 yrs living exp in cash. I'd take the 100k and add it vanguard high div yield idx.


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