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Cash Enhancements ??


ValueMaven
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Assume you are sitting in 20% - 30% in cash due to valuations etc -- you are most likely getting a broker rate of literally 3bps to 5bps ... while the 3M bill is yielding over 2.2% !!  Unless you are rolling over T-bills actively, most brokers are making risk-free money hand over fist right now.  I dont want credit or duration risk (hence no closed end funds which were CRUSHED in 4Q) ... I've been looking at different ways to enhance my cash.  It looks like I am going to move 75% of my cash into the SHV ETF - which is under 1yr duration, and only invests in UST.  There is a FLOT etf - which moves with LIBOR, and is rated single-A in terms of credit with like a 0.40 duration -- but even still -- to much risk.  I'd be open to see what others thing of this .. you always want some dry powered in case of a flash crash etc -- however I am tired of letting brokers make free money off my money!!

 

-VM

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Assume you are sitting in 20% - 30% in cash due to valuations etc -- you are most likely getting a broker rate of literally 3bps to 5bps ... while the 3M bill is yielding over 2.2% !!  Unless you are rolling over T-bills actively, most brokers are making risk-free money hand over fist right now.  I dont want credit or duration risk (hence no closed end funds which were CRUSHED in 4Q) ... I've been looking at different ways to enhance my cash.  It looks like I am going to move 75% of my cash into the SHV ETF - which is under 1yr duration, and only invests in UST.  There is a FLOT etf - which moves with LIBOR, and is rated single-A in terms of credit with like a 0.40 duration -- but even still -- to much risk.  I'd be open to see what others thing of this .. you always want some dry powered in case of a flash crash etc -- however I am tired of letting brokers make free money off my money!!

 

-VM

 

Which broker is sucking your blood?

 

I started realizing this problem since last October. TD AM just won't give me anything reasonable. But I called Fidelity and they put my cash into a sweep vehicle called government obligations that yields 1.9%.

Interactive Brokers pays 1.9% interest on cash if your cash balance is above like 100k?

 

Schwab also offers something like Fido's cash sweep vehicle.

 

Don't listen to the other guy that suggest you put cash into vanguard. You have to manually make that trade, and pay a $30+ commission, and if you withdraw within 90 days, there is extra penalty. What you needed is a cash sweep vehicle that doesn't need any of your actions so you can focus on important tasks like buying stocks.

 

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Why not just link EFT to your account and transfer from higher yielding online bank to brokerage? For instance, if I buy a stock, I might buy it on margin and then transfer the cash from my bank to cover it before settlement.

 

The best options right now that I'm aware of are the Vanguard money markets, at Fidelity it's SPRXX, FZDXX (or FNSXX for the big timers) and Western State Bank which pays 2.5%.

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