Best Low Cost ETF for Cash

Discussion of the Cash portion of the Permanent Portfolio

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ppnewbie
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Best Low Cost ETF for Cash

Post by ppnewbie » Fri Apr 16, 2021 11:09 am

My fidelity autoroll stop auto rolling and Fidelity put me int FDRXX as my cash account. I am not a fan of that because they are charging me .34% and they invest in repo's.

I am trying to find the lowest cost, MOST RELIABLE short term treasury ETF for my 401k. I am also considering ETF's that hold 1 to 2 year notes as well if the expense is low but am also interested in opinions on if the max downside of interest rate increases for a fund that holds treasury notes is worth it.

OPTIONS
SHY, SHV, BIL, VGSH,SGOV (Seems like a new one), SCHO

Here is a good list for reference list: https://etfdb.com/etfs/bond/treasuries/ ... esc&page=1
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Re: Best Low Cost ETF for Cash

Post by jswinner » Fri Apr 16, 2021 1:46 pm

Yes, recently, I have set some manual auction buys with AR off for now. Can you set your CORE to the FDIC Bank sweep?
I have kept a rolling short term cash ladder as a proxy for a MM account. Recent 4 and 8 week offerings have been posted with negative yields, and that may be the reason the auto roll fails. When you place a manual order, there are a couple of exception screens to accept when the expected yield is shown negative.
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Re: Best Low Cost ETF for Cash

Post by mathjak107 » Fri Apr 16, 2021 3:16 pm

I would stay with the big family money markets ..they are absorbing expenses and doing what they have to hold a buck .

As far as I know the etfs are not waiving expenses
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Re: Best Low Cost ETF for Cash

Post by ppnewbie » Fri Apr 16, 2021 3:18 pm

jswinner wrote:
Fri Apr 16, 2021 1:46 pm
Yes, recently, I have set some manual auction buys with AR off for now. Can you set your CORE to the FDIC Bank sweep?
I have kept a rolling short term cash ladder as a proxy for a MM account. Recent 4 and 8 week offerings have been posted with negative yields, and that may be the reason the auto roll fails. When you place a manual order, there are a couple of exception screens to accept when the expected yield is shown negative.
Thanks for the suggestion. I'll look into the FDIC sweep.
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Re: Best Low Cost ETF for Cash

Post by jhogue » Fri Apr 16, 2021 3:43 pm

Can you hold FDLXX in your 401k plan? It is less likely to have a net asset value fluctuation than the ETFs, and (as mathjak indicates) part of the expense ratio is currently being waived by Fidelity.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Best Low Cost ETF for Cash

Post by mathjak107 » Fri Apr 16, 2021 3:47 pm

Fdlxx I believe is closed if you have no account
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Re: Best Low Cost ETF for Cash

Post by pp4me » Fri Apr 16, 2021 3:50 pm

I've noticed lately that both FZFXX and FDRXX, both of which I use, one in taxable and the other my IRA, say n/a in the gain/loss columns. Is this because they don't want customers seeing that their cash is actually losing money? Don't remember this always being the case but I could be wrong.

I used to keep excess cash in T-Bills but right now it's not even worth the effort to buy them.

I was also using FUMBX. Fidelity's own short term bond fund, and still am in my IRA account. When I saw it go RED in my taxable account I sold it all and it's now sitting in FZFXX where it probably isn't doing any better, but see above. In my IRA it shows a positive gain of 8.2% but only because it has been sitting there for a long time.
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Re: Best Low Cost ETF for Cash

Post by ppnewbie » Fri Apr 16, 2021 4:23 pm

mathjak107 wrote:
Fri Apr 16, 2021 3:47 pm
Fdlxx I believe is closed if you have no account
I think they opened it again at one point. Will check this out but the .34% kills me. Which is why I'm considering something SCHO at .05.
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Re: Best Low Cost ETF for Cash

Post by ppnewbie » Fri Apr 16, 2021 4:24 pm

ppnewbie wrote:
Fri Apr 16, 2021 4:23 pm
mathjak107 wrote:
Fri Apr 16, 2021 3:47 pm
Fdlxx I believe is closed if you have no account
I think they opened it again at one point. Will check this out but the .34% kills me. Which is why I'm considering something SCHO at .05.
Actually FDLXX is .42%.
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Re: Best Low Cost ETF for Cash

Post by jhogue » Fri Apr 16, 2021 4:36 pm

FDLXX did close to new investors when interest rates collapsed in 2020. It has since re-opened. The yield has been close to miniscule, but it remains all invested in US Treasury-issued securities. Yes, the ER is outrageous, but I would rather have a Treasury money market fund than an ETF.

@ppnewbie: I am curious to know why are you keeping cash in your 401k instead of the three volatile assets?
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Best Low Cost ETF for Cash

Post by ppnewbie » Fri Apr 16, 2021 4:47 pm

jhogue wrote:
Fri Apr 16, 2021 4:36 pm
FDLXX did close to new investors when interest rates collapsed in 2020. It has since re-opened. The yield has been close to miniscule, but it remains all invested in US Treasury-issued securities. Yes, the ER is outrageous, but I would rather have a Treasury money market fund than an ETF.

@ppnewbie: I am curious to know why are you keeping cash in your 401k instead of the three volatile assets?
Was following the PP. But also was thinking of cash as a profit taking mechanism. IE - If everything is expensive, there is always cash in the PP to pull the profits out.

Any thoughts on that reasoning? Would welcome the feedback.
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Re: Best Low Cost ETF for Cash

Post by ppnewbie » Fri Apr 16, 2021 4:48 pm

ppnewbie wrote:
Fri Apr 16, 2021 4:47 pm
jhogue wrote:
Fri Apr 16, 2021 4:36 pm
FDLXX did close to new investors when interest rates collapsed in 2020. It has since re-opened. The yield has been close to miniscule, but it remains all invested in US Treasury-issued securities. Yes, the ER is outrageous, but I would rather have a Treasury money market fund than an ETF.

@ppnewbie: I am curious to know why are you keeping cash in your 401k instead of the three volatile assets?
Was following the PP. But also was thinking of cash as a profit taking mechanism. IE - If everything is expensive, there is always cash in the PP to pull the profits out.

Any thoughts on that reasoning? Would welcome the feedback.

Also - why do you trust the FDLXX more than a short term treasury ETF.
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Re: Best Low Cost ETF for Cash

Post by mathjak107 » Fri Apr 16, 2021 6:08 pm

It isn’t trust ...it is the fact the etf can have a negative return ...the fidelity funds waived the fees and if needed they put money in so the fund hold a dollar .

There is none of that done on the etfs as far as I know
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Re: Best Low Cost ETF for Cash

Post by jhogue » Fri Apr 16, 2021 6:29 pm

@ ppnewbie:

1. Fluctuation in net asset value is fine for stocks, LTTs, and gold-- in fact, that is what the PP investor should want and expect from those volatile assets. Cash, though, is in the PP to create a pool of safe and liquid funds. A money market fund is designed for principal stability, unlike an ETF, which is designed to trade intra-day. It is true that some money market funds have "broken the buck," but only rarely and none of those (to the best of my knowledge) was a Treasury-only money market fund.

2. I never kept any cash at all in my 401k during the accumulation stage. By definition, tax-deferred and tax-exempt portfolio space is scarce and should be reserved for the three volatile assets This is especially true when annualized returns on cash are so low-- like right now.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Best Low Cost ETF for Cash

Post by ppnewbie » Fri Apr 16, 2021 6:49 pm

jhogue wrote:
Fri Apr 16, 2021 6:29 pm
@ ppnewbie:

1. Fluctuation in net asset value is fine for stocks, LTTs, and gold-- in fact, that is what the PP investor should want and expect from those volatile assets. Cash, though, is in the PP to create a pool of safe and liquid funds. A money market fund is designed for principal stability, unlike an ETF, which is designed to trade intra-day. It is true that some money market funds have "broken the buck," but only rarely and none of those (to the best of my knowledge) was a Treasury-only money market fund.

2. I never kept any cash at all in my 401k during the accumulation stage. By definition, tax-deferred and tax-exempt portfolio space is scarce and should be reserved for the three volatile assets This is especially true when annualized returns on cash are so low-- like right now.
Im in the preservation stage at the moment. I'll do some back tests and think about this.
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Re: Best Low Cost ETF for Cash

Post by mathjak107 » Sat Apr 17, 2021 3:16 am

ppnewbie wrote:
Fri Apr 16, 2021 4:24 pm
ppnewbie wrote:
Fri Apr 16, 2021 4:23 pm
mathjak107 wrote:
Fri Apr 16, 2021 3:47 pm
Fdlxx I believe is closed if you have no account
I think they opened it again at one point. Will check this out but the .34% kills me. Which is why I'm considering something SCHO at .05.
Actually FDLXX is .42%.
All fees are waived ..fees are zero right now or the return would break the buck ..the return without the waived fees would be minus .33%
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Re: Best Low Cost ETF for Cash

Post by barrett » Sat Apr 17, 2021 7:32 am

ppnewbie wrote:
Fri Apr 16, 2021 6:49 pm
jhogue wrote:
Fri Apr 16, 2021 6:29 pm
@ ppnewbie:

1. Fluctuation in net asset value is fine for stocks, LTTs, and gold-- in fact, that is what the PP investor should want and expect from those volatile assets. Cash, though, is in the PP to create a pool of safe and liquid funds. A money market fund is designed for principal stability, unlike an ETF, which is designed to trade intra-day. It is true that some money market funds have "broken the buck," but only rarely and none of those (to the best of my knowledge) was a Treasury-only money market fund.

2. I never kept any cash at all in my 401k during the accumulation stage. By definition, tax-deferred and tax-exempt portfolio space is scarce and should be reserved for the three volatile assets This is especially true when annualized returns on cash are so low-- like right now.
I'm in the preservation stage at the moment. I'll do some back tests and think about this.
I'm in the same boat as ppnewbie with a bunch of cash in both tax-deferred and tax-exempt. I got to a point where I was no longer comfortable holding LTTs so I have a lot of cash in these accounts that is not doing anything (well, it's not losing money in nominal terms, but that's about it).

I haven't seen it discussed on here recently but we used to talk a lot about the PP in every account vs, the whole-portfolio PP. jhogue, do you keep little to no cash in the tax-advantaged accounts and a lot of it in taxable?
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Re: Best Low Cost ETF for Cash

Post by mathjak107 » Sat Apr 17, 2021 7:57 am

i keep the cash split between fdlxx , shy and bil ...i have a lot less in bil then the other two
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Re: Best Low Cost ETF for Cash

Post by mathjak107 » Sat Apr 17, 2021 8:40 am

here is what fdlxx shows


------------------------ 4/16/2021-------- 3/31/2021
Compound Effective --0.01% ------------------0.01%
7-Day Yield 3------- 0.01%------------------- 0.01%
7-Day Yield Without Reductions ----------------minus -0.33%

so they show without fidelity waiving fees and holding things at a buck the fund would be at minus .33%
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Re: Best Low Cost ETF for Cash

Post by jhogue » Sat Apr 17, 2021 11:16 am

@ Barrett,

My Cash is currently split as follows:
20% of Cash in tax exempt accounts (FDLXX in Roths)
18% of Cash in tax deferred accounts (FDLXX in T-IRA)
37% of Cash in tax deferred I-bonds
25% of Cash in taxable accounts (FDLXX in Fidelity brokerage)

-I am currently holding more Cash than usual in my Roth accounts, because I recently rebalanced out of stocks there. Right now, LTTs are my lagging asset; if interest rates continue to rise I may need to rebalance into LTTs with the FDLXX that is sitting in my Roths.

-I count I-bonds as tax deferred (even though they are not in T-IRA/Roth accounts) because I am not paying current tax on their interest.

-There are certain practicalities involved, but I have found it most tax efficient for me to keep most stocks in Roths and most LTTs in T-IRAs. Cash and gold, because they generate no interest or dividends are split among tax exempt, tax deferred, and taxable.

-With the past I-bond rate at 1.68% and the future I bond rate at least 3.54%, I estimate that my entire all-Treasury Cash position will generate 2.61% between Nov. 2020 and Nov. 2021. FDLXX provides daily liquidity and I-bonds provide yield over time.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Best Low Cost ETF for Cash

Post by Kevin K. » Sat Apr 17, 2021 2:53 pm

SCHO's YTD return is -.05%. BIL is -.02%.

I can get +.05% just stashing cash in savings at Schwab Bank, .35% in an NCUA-insured savings account at my local credit union or (best of all - by far - 3.54% on iBonds (albeit with a paltry 10K purchase limit).

In short it seems to me the days of substituting short-term Treasury ETF's for Treasury MM in the PP as was standard practice (and recommended in the PP book) seem to be over, at least for the near term. We're going to get a negative real return on cash in every form (except iBonds) anyway but why lock in a negative nominal return too? If you're gonna do that you might as well buy some VTIP and hope for an inflation spike.

It's bad enough with cash that many on Bogleheads are buying MYGA's instead with up to half of their cash stash.
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Re: Best Low Cost ETF for Cash

Post by pugchief » Sat Apr 17, 2021 4:40 pm

If you believe FDIC insurance is as good as treasuries (I do), T-Mobile Money is offering an online savings account that pays 1.0%. The only drawback is there is a $3000/day electronic transfer limit, but you can avoid that by initiating the transfers at the other institution. I set it up with Fidelity and just make the requests on that platform.
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Re: Best Low Cost ETF for Cash

Post by Kevin K. » Sat Apr 17, 2021 6:05 pm

pugchief wrote:
Sat Apr 17, 2021 4:40 pm
If you believe FDIC insurance is as good as treasuries (I do), T-Mobile Money is offering an online savings account that pays 1.0%. The only drawback is there is a $3000/day electronic transfer limit, but you can avoid that by initiating the transfers at the other institution. I set it up with Fidelity and just make the requests on that platform.
Thanks for sharing this. Good recent thread about this option on Bogleheads, in which it's noted that some have moved as much as 5 figures into these accounts from their banks or brokerages with no problems, and that joint accounts and beneficiaries aren't permitted.

Whether it's worth if for 1% (fully taxable, state and federal, mind you) probably depends on how big a cash pile you have and how much complexity (in the way of additional accounts to deal with) you're comfortable with. I'd be tempted if I had a few million sitting around but remembering I have iBonds at Treasury Direct is enough of a challenge most days.
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Re: Best Low Cost ETF for Cash

Post by Don » Sat Apr 17, 2021 7:18 pm

No beneficiaries? That sounds reckless.
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Re: Best Low Cost ETF for Cash

Post by barrett » Sun Apr 18, 2021 7:11 am

jhogue wrote:
Sat Apr 17, 2021 11:16 am
@ Barrett,

My Cash is currently split as follows:
20% of Cash in tax exempt accounts (FDLXX in Roths)
18% of Cash in tax deferred accounts (FDLXX in T-IRA)
37% of Cash in tax deferred I-bonds
25% of Cash in taxable accounts (FDLXX in Fidelity brokerage)

-I am currently holding more Cash than usual in my Roth accounts, because I recently rebalanced out of stocks there. Right now, LTTs are my lagging asset; if interest rates continue to rise I may need to rebalance into LTTs with the FDLXX that is sitting in my Roths.

-I count I-bonds as tax deferred (even though they are not in T-IRA/Roth accounts) because I am not paying current tax on their interest.

-There are certain practicalities involved, but I have found it most tax efficient for me to keep most stocks in Roths and most LTTs in T-IRAs. Cash and gold, because they generate no interest or dividends are split among tax exempt, tax deferred, and taxable.

-With the past I-bond rate at 1.68% and the future I bond rate at least 3.54%, I estimate that my entire all-Treasury Cash position will generate 2.61% between Nov. 2020 and Nov. 2021. FDLXX provides daily liquidity and I-bonds provide yield over time.
Thanks for sharing this, jhogue. You guys have motivated me to at least switch my Fidelity cash positions to FDLXX instead of whatever the default core cash fund is.

Wife & I will also be buying $10,000 each of I-Bonds in early May. Ten of my precious EE-Bonds that I bought in May of 1991 are maturing on 5/1/21 and another group are doing so on 7/1/21. Sigh. I haven't purchased I-Bonds really since about 2008 because I was anchored on the 3%+ fixed rate of 20 years ago, but they are clearly the best of the cash options at the moment. I had also decided a while back to not accumulate any more savings bonds for a few years as I had gotten to the point where I had maybe too much "deep cash". But all of my remaining EE-Bonds are coming due between now & February of 2023, so I can start to reload.
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