Gyroscopic Investing

workingatit wrote: aside from getting into to 1-3 yr treasuries, I know of shv being used
is this considered the best in this category?

and for treasury bills, what is the recommendation for duration?

thanks

There is no hard and fast rule on duration, though I think there is a strong consensus against going out farther than 3 years on the yield curve. It mostly comes down to risk tolerances. The shorter the duration, the safer you are but the lower your return. If you want to go with T Bills in an ETF, a perfectly reasonable option, I would suggest either SHV, or BIL which is even shorter in duration. Both are good choices and IMHO very safe. Of course direct ownership is always the safest route, but seriously, if T BILL ETFs are not paying then chances are the only thing you are going to want to own is gold.

SHV: yield, 0.00%; expense ratio, 0.12%
BIL: yield, 0.00%; expense ratio, 0.14%
SHY: yield 0.32%; expense ratio, 0.15%
(numbers from marketwatch.com)

Is it really worth the effort to buy any of these ETFs right now?  To make 0.17%, at best, annually?  That's a whopping $17 a year on a $10,000 investment.  Sure, there is safety in buying the bonds directly, but the ETFs seem a waste of time right now, especially if you have to pay a brokerage fee.

I prefer I-bonds, CDs from too-big-to-fail institutions, high-interest savings/checking accounts, and money market accounts for the rest.  I don't think short-term interest rates will rise any time in the next decade.

Cash is not there for its return. It's there for safety. Under normal circumstances you will get a slight negative real return since cash generally lags inflation.

To answer the original question, IMO, the best vehicle for cash is a T-bill money market, but very few of those are open to new investors right now. Among ETFs, BIL is probably closest to a MMF. SHV is probably second-closest.

Another concern with SHV in the context of an all-ETF portfolio is that you probably have to use TLT for bonds, so you already have one asset at iShares. If you use SHV for cash then approximately half your portfolio is held with only one fund sponsor, which is not well diversified. With BIL it is possible to use a different vendor for each asset, for example VTI, TLT, SGOL, BIL.

i hold the distinguished  honor of actually going through the failure of a money market.  we lost a percent or 2 but the bigger issue was once it broke the buck money was locked up  for a few months.

the money market was called the reserve and it was linked to my david lerner account.  luckily i had very little in it but it was a rude awakening to what does happen with money markets first hand .

Here's a link for Desert's PP cash heresy:

http://www.interest.com/cd-rates/advice ... pays-3-04/

Desert, do you have those CDs laddered so that you always have some liquid cash? And if you had to buy beaten down stocks (The Desert Portfolio holds 30% in equities, right?), would you have enough cash on hand to do so? Thanks.

from what I can see the current max rate is 1.5% for penfed cd's and you'd have to go out to 5 or 7 yrs for that

https://www.penfed.org/Certificates_Overview/#tabs-2

What scares me about any duration at all is lack of responsiveness.  If interest rates suddenly spike, and you have a 5 year CD, you have to wait 5 years before your cash starts responding.  (That can be mitigated with ladders, of course, but not solved.)  Also, CDs are certainly "deep cash", as anything you put there can't be used for emergency uses, for rebalancing, or for drawing down (if you're in that phase).

GE Capital still pays a 1%+ interest rate on their savings account:
https://www.gecapitalbank.com/savings-p ... vings.html
That seems like as good a place as any.  Especially since you can switch to something better if it comes along without having to wait for a CD to expire.

Xan wrote: What scares me about any duration at all is lack of responsiveness.  If interest rates suddenly spike, and you have a 5 year CD, you have to wait 5 years before your cash starts responding.  (That can be mitigated with ladders, of course, but not solved.)  Also, CDs are certainly "deep cash", as anything you put there can't be used for emergency uses, for rebalancing, or for drawing down (if you're in that phase).

GE Capital still pays a 1%+ interest rate on their savings account:
https://www.gecapitalbank.com/savings-p ... vings.html
That seems like as good a place as any.  Especially since you can switch to something better if it comes along without having to wait for a CD to expire.

Ally bank offers a raise your rate CD option that enables you to earn the highest rate available should interest rates rise. I have a 2 and 4 year CD with this option to ensure that I earn the highest rate available. The balance of my cash is in Savings at .99%

I have my cash portion in a Capital One 360 savings account at 0.75%. Is that an acceptable place for the cash portion of the PP?

The short answer: strictly speaking "no," because the only orthodox cash vehicle is T-bills or a T-bill-only money market fund; but many forum members seem comfortable with FDIC insured accounts because, barring a widespread bank run, they are very nearly as safe.

KevinW wrote: The short answer: strictly speaking "no," because the only orthodox cash vehicle is T-bills or a T-bill-only money market fund; but many forum members seem comfortable with FDIC insured accounts because, barring a widespread bank run, they are very nearly as safe.

Ah ok got it, thanks.

I own BIL as my cash portion.  It is all in a tax advantaged IRA account, so in reality is not liquid.  My question is if I am using BIL as my CASH portion and my emergency fund, would it be better to have this in a taxable account for liquidity in case of an emergency or just keep it where it is?

If you're planning to use your PP cash as your emergency fund to avoid having to have a separate cash emergency fund--and you should--then the cash should be accessible.