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Where would you keep your cash?


matjone
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In keeping with Ben Graham rule, I try to keep some of my money in equities and some in bonds, and right now for the bond category I stick to short term treasuries.  Problem is, there is no treasury fund in my 401(k).  My options are PIMCO total return, which invests in intermediate term bonds and MBS, and Wells Fargo Stable Return, which invests in money market and Guaranteed Investment Contracts.  Which would be the better choice?  I am tempted to go with the stable return so that I don't have to worry about losing money if interest rates go up, but I know that money market funds aren't 100% safe.

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Actually I do have most of it in equities, but I still try to follow Graham's allocation rule.  It seems like most of the disciples of Graham disregarded  this rule.  I might someday too.  I know that  equities have the edge over the long haul, and if they made a rule that I had to keep the money in whatever fund I picked for 10 years I'd put it all in stocks.  But for right now I am following the philosophy that I'm not smart or experienced enough to disagree with Ben Graham.  It is nice to have money lying around when the market starts crashing too.

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Broaden the instruments in the bond category to include margin &/or mortgage. $ from the Bond allocation pay down the margin/mortgage. Reverse the process when you can earn more on the bonds than the mortgage costs.

 

Lower leverage (risk), higher net after-tax return, & less over-exposure to equities in the bad times. The lower fee income from the reduction in Assets Under Management will put your adviser/agent in the poor house, so don't expect a recommendation.

 

Graham generally didn't leverage, so debt (margin/mortgage) was not a 'category' or even a (negative) bond adjustment. Had he done so we would all be leveraging only in bull markets, & viewing net carry cost as importantly as Margin of Safety.

   

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I’m not sure about Money market funds, I would  go with flexible term deposit . it is fully open and the r/r about  1.5%- in Canada.

Ben Graham recommended to take on leverage/ margin, only, when market at exceptionally low level. Today – it is not the case .

Cheers!

 

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