How do you invest the Cash portion?

Discussion of the Cash portion of the Permanent Portfolio

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ochotona
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Re: How do you invest the Cash portion?

Post by ochotona » Mon Jul 08, 2019 11:19 am

If I were younger, say in my 40s, I'd be buying Series EE Savings Bonds. If you hold for twenty years, they double in value, for a CAGR of 3.5%. But you have to hodl. Being in my late 50s now, I'm not sure I want to mess with TreasuryDirect when I'm in my late 70s. By that time I hope to be in HBPP autopilot Nirvana with my daughter doing the annual portfolio look.
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Re: How do you invest the Cash portion?

Post by Kbg » Tue Jul 09, 2019 9:23 am

I think "cash" needs to be quickly available. What is quick enough is up to the individual. While I have lots of T-Bills I manage monthly on T-Direct, it's also lots of work. I think at some point errors from mistakes resulting from an aging brain could exceed any advantage of DIY. Small bits of cash lying around from the discount to the maturity value of the bond are also a pain in the butt and means I'm not investing the "max" I could be.

Broken record spins again...simplicity is of value and perhaps worth paying for.
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Re: How do you invest the Cash portion?

Post by pmward » Tue Jul 09, 2019 9:24 am

ochotona wrote:
Mon Jul 08, 2019 11:19 am
If I were younger, say in my 40s, I'd be buying Series EE Savings Bonds. If you hold for twenty years, they double in value, for a CAGR of 3.5%. But you have to hodl. Being in my late 50s now, I'm not sure I want to mess with TreasuryDirect when I'm in my late 70s. By that time I hope to be in HBPP autopilot Nirvana with my daughter doing the annual portfolio look.
There's good likelihood you will wind up winning anyways. 3.5% might sound good in todays world, but who knows what the next 20 years may bring. The average of rolling T-Bills very well could destroy that 3.5% over 20 years.
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Re: How do you invest the Cash portion?

Post by Maddy » Mon Jul 29, 2019 3:25 pm

What is the critical difference between Vanguard's treasury money market fund and a short-term treasury fund? Is one more suitable for the PP than another?
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Re: How do you invest the Cash portion?

Post by dualstow » Mon Jul 29, 2019 6:06 pm

Maddy wrote:
Mon Jul 29, 2019 3:25 pm
What is the critical difference between Vanguard's treasury money market fund and a short-term treasury fund?
Is one more suitable for the PP than another?
Being both a money market fund and one that holds just treasurys, VUSXX is the ultimate cash vehicle for the pp, in my opinion. As a money market, each unit is a dollar. Put in $10,000, and know that you're going to be able to take out $10,000 (plus interest earned) when you need it- Well, you should be able to get it within a day if you sell shares to your sweep account, the Federal Money Market thing.

Prime money market fund also maintains a $1 share price, but even that fell victim to "breaking the buck" in 2008 or '09, losing money with most money market funds. It's not a terrible choice most of the time.

A short-term treasury fund has the *quality* of VUSXX, but not being a money market fund, I would think it could fluctuate in value, especially if it holds some 2-year notes. You can sell shares when you want to, but they may not always be equal to what you put in. (They might be worth *more*, and the dividends might be better than VUSXX).

So, aim for something *very* short term and even then, you might want to have your core cash in either VUSXX or just t-bills held directly by you, a fine 3rd choice.

The expense ratio (ER) between the two funds may be different. VUSXX's ER is $0.09, ie a $9 annual fee if you maintain a balance of $10,000.

And finally, you need US$50,000 to get started in VUSXX, although you don't have to maintain that balance.
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Re: How do you invest the Cash portion?

Post by Ad Orientem » Wed Aug 07, 2019 7:40 pm

vnatale wrote:
Thu Jul 04, 2019 3:05 pm

In sum, for those of you following what is proscribed in the book (with no additional enhancements) how are you fulfilling the 25% cash portion of the portfolio?

Thanks
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Re: How do you invest the Cash portion?

Post by dualstow » Wed Aug 07, 2019 8:24 pm

^ha. The only form of cash that is no good is cash under the mattress. ^
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Re: How do you invest the Cash portion?

Post by Smith1776 » Thu Aug 15, 2019 1:58 am

Up here in Canada it's all about the BMO Short Federal Bond Index ETF for cash, and I've got quite a few coins in that fund. It's really one of the few decent choices up here in the north.

https://www.bmo.com/gam/ca/advisor/prod ... file%2FZFS
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Re: How do you invest the Cash portion?

Post by dualstow » Thu Aug 15, 2019 8:10 am

Smith1776 wrote:
Thu Aug 15, 2019 1:58 am
Up here in Canada it's all about the BMO Short Federal Bond Index ETF for cash, and I've got quite a few coins in that fund. It's really one of the few decent choices up here in the north.

https://www.bmo.com/gam/ca/advisor/prod ... file%2FZFS
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Re: How do you invest the Cash portion?

Post by Xan » Thu Aug 15, 2019 9:15 am

He's switched to Isaac Newton now so I'm all confused.
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Re: How do you invest the Cash portion?

Post by Kriegsspiel » Thu Aug 15, 2019 9:17 am

I thought that was the guy from Def Leppard.
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Re: How do you invest the Cash portion?

Post by dualstow » Thu Aug 15, 2019 11:30 am

Kriegsspiel wrote:
Thu Aug 15, 2019 9:17 am
I thought that was the guy from Def Leppard.
O0 See now if Medium Tex were here, he would rewrite "Photograph" with pp-related lyrics.
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Re: How do you invest the Cash portion?

Post by Kriegsspiel » Thu Aug 15, 2019 11:52 am

What about the superb Gyroscope, by Dismemberment Plan?
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Re: How do you invest the Cash portion?

Post by Smith1776 » Thu Aug 15, 2019 2:45 pm

You see, for the longest time I've kind of lamented choosing "Smith1776" as my username.

Because now changing my avatar to any other historical thinker looks incongruous. :o

If only I could now be Newton1687 haha.
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Re: How do you invest the Cash portion?

Post by dualstow » Thu Aug 15, 2019 3:08 pm

Smith1776 wrote:
Thu Aug 15, 2019 2:45 pm
You see, for the longest time I've kind of lamented choosing "Smith1776" as my username.

Because now changing my avatar to any other historical thinker looks incongruous. :o

If only I could now be Newton1687 haha.
You can have it changed. Greg, who made an appearance here recently, was 1NV3ST0R or something like that once upon a time.
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Re: How do you invest the Cash portion?

Post by Smith1776 » Fri Aug 16, 2019 1:08 am

Hehe, dualstow, I personally think the PP is more like Iron Man than the hulk -- because it's armoured on all sides. ;D
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Re: How do you invest the Cash portion?

Post by dualstow » Fri Aug 16, 2019 8:23 am

Smith1776 wrote:
Fri Aug 16, 2019 1:08 am
Hehe, dualstow, I personally think the PP is more like Iron Man than the hulk -- because it's armoured on all sides. ;D
With extremely precious metals.
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Re: How do you invest the Cash portion?

Post by Smith1776 » Fri Sep 06, 2019 3:23 pm

A bit of water cooler talk here.

Which would you guys consider to be safer for the cash portion of the PP, assuming you could only pick one?

1) A ladder of 1 - 5 year federal government treasuries

2) A fund with 0 - 90 day commercial paper obligations?
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Re: How do you invest the Cash portion?

Post by ochotona » Fri Sep 06, 2019 3:33 pm

Smith1776 wrote:
Fri Sep 06, 2019 3:23 pm
A bit of water cooler talk here.

Which would you guys consider to be safer for the cash portion of the PP, assuming you could only pick one?

1) A ladder of 1 - 5 year federal government treasuries

2) A fund with 0 - 90 day commercial paper obligations?

2) because interest rate swings will cause volatility for 1). Cash is zero-ish duration almost by definition.
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Re: How do you invest the Cash portion?

Post by Kbg » Fri Sep 06, 2019 3:47 pm

When it comes to bonds these things are highly efficient and I have no idea why we try to over analyze them. It just isn't hard if you aren't buying a fund. Your return is the interest coupon +/- the par value discount/premium.

The two options provided are time vs. credit risk...treasuries are categorically safer and the interest will be fixed. Commercial paper is more risky as compared to treasuries and the interest return will float/adjust rather quickly.

If the question truly is safety defined as I get all my principal back with interest, no contest.

If the question is where do you think interest rates are going...Och's guess is as good as anybody else's guess.
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Re: How do you invest the Cash portion?

Post by Smith1776 » Mon Sep 09, 2019 2:36 pm

Right, it's very interesting to see who prefers what kind of risk.

Myself? Seeing what happened to the Reserve Primary Fund with its commercial paper, I prefer the longer duration federal notes personally.
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Re: How do you invest the Cash portion?

Post by mathjak107 » Mon Sep 09, 2019 4:41 pm

what money markets can invest in has changed drastically since the reserve fund failed . i owned that money market too
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Re: How do you invest the Cash portion?

Post by Smith1776 » Mon Sep 09, 2019 5:41 pm

mathjak107 wrote:
Mon Sep 09, 2019 4:41 pm
what money markets can invest in has changed drastically since the reserve fund failed . i owned that money market too
That is true.
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Re: How do you invest the Cash portion?

Post by vnatale » Tue Sep 10, 2019 7:20 pm

Regarding the below....

1) I Bonds. The limit is $10,000? Plus, if you overpay your taxes by $5,000 you can purchase another $5,000 with your tax refund? Is that what you do?

2) Can you give more description of: "1-3-6 months TBills in auto-roll at Fidelity"

3) Obviously you have no concern regarding FDLXX when I wrote:

"Similarly going to Fidelity I see that the composition of the Fidelity® Treasury Only Money Market Fund (FDLXX) is:

Normally investing at least 99.5% of total assets in cash and U.S. Treasury securities.
In addition, the fund normally invests at least 80% of its assets in U.S. Treasury securities.

Its current composition is:

U.S. Treasury Bills 72.23% (81.33% / 9/10/19) , U.S. Treasury Coupons 28.64% (23.00% / 9/10/19) , and Net Other Assets (0.87%) (-4.33% / 9/10/19)"

4) Not following this what you wrote (primarily what the abbreviations represent): "(whichever has the best interest rate at the moment), ITOT, IJS (I have a Golden Butterfly, not a pure PP) o IAU."

Thanks

Vinny

anato wrote:
Fri Jul 05, 2019 12:36 am
3 components for me:
1. I Bonds (every year, as many as I can get)
2. 1-3-6 months TBills in auto-roll at Fidelity
3. $10k-ish in a Fidelity cash account, in FDLXX

The dynamic is fairly easy: when the balance in the cash account reaches $11k (and no big expense is on the horizon), that $1k becomes a T-Bill (whichever has the best interest rate at the moment), ITOT, IJS (I have a Golden Butterfly, not a pure PP) o IAU.
Long term treasury bonds are all in the 401k and HSA (CA resident, so I need to avoid paying state taxes on that HSA), I don't keep cash in them except for the $1-2k building up for the next (mostly bond) purchase.
Once a year, I ransack the T-Bills to get as many I Bonds as I can.
Rinse and repeat.

If some big expense is on the horizon (e.g. new car), I just make sure I keep that money ready available in either the cash account or (if not happening in the next month or so) T-Bills, in excess of my target 20% allocation.
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Re: How do you invest the Cash portion?

Post by vnatale » Tue Sep 10, 2019 7:27 pm

It seems that if one is a single person (with no trust) then the I Bond limit is $10,000 plus $5,000 via using a tax refund (which would, of course, require one to overpay taxes by at least $5,000)?

Vinny

boglerdude wrote:
Fri Jul 05, 2019 3:27 am
Welcome to the forum OP
I use ibonds and Orion's 4% checking
With some effort you can buy more than 10k ibonds or EE bonds each year
https://www.bogleheads.org/forum/viewtopic.php?t=213142
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