How do you invest the Cash portion?

[ochotona]

Does that whole process now seem like the Dark Ages compared to now? I also used to buy tons of stamps back and write a lot of checks. Now it's only a handful of stamps used ALL year and not that many checks written.

Vinny

Yeah... except just remember... common everyday email is NOT ENCRYPTED. If you want something to be really pretty private, send it by US Mail... or encrypt it.

[dualstow]

...
I learned something new about Vanguard today.
...

The fund numbers were more useful in the old days when I used to buy shares with a paper check in the mail. You had to write the fund number on the form and on the check.

Does that whole process now seem like the Dark Ages compared to now? I also used to buy tons of stamps back and write a lot of checks. Now it's only a handful of stamps used ALL year and not that many checks written.

Vinny

I have to say I miss it. There's a blue mailbox half a block away from me, and I enjoyed the process of walking there more than I do a button click. Of course, the new way is easier and I usually have fund purchases on autopilot anyway.

Paying bills with a check and stamp on the other hand is not so much fun, so I do think of that in a Dark Agey way. (Also on autopilot now).

Encryption: well, I read about thieves who raid mailboxes with a stick and tape attached. They erase the writing on checks and steal them. So, every system has its weakness. Once in a while I use protonmail to send an email to friends, and if it's something sensitive, I lock it with a password and supply a hint. Or rather, I used to. More often than not, they'd text me and ask "What's this?" They were afraid to open it.
But, usually it's gmail to gmail, so-- only the good folks at google can read it. j/k

[ochotona]

I am going to grab a 1 year Jumbo CD with 2.06% APR at Advancial Credit Union, which is a Texas credit union with branches in some of the Energy States: TX, LA, AK, OK. But I think anyone can open an account and buy a CD.

[drumminj]

I am going to grab a 1 year Jumbo CD with 2.06% APR at Advancial Credit Union, which is a Texas credit union with branches in some of the Energy States: TX, LA, AK, OK. But I think anyone can open an account and buy a CD.

I swear my Discover Bank CD just rolled over at a higher rate than that...hrm, looks like it did (2.2% a few weeks ago), but they're now down to offering 2.00%.

I'm still happy I locked in some 3.1% 5-yr CDs a short while back while I could...feel that big money rollin' in

[jhogue]

I am alternately fascinated and perplexed by the endless hunt for yield in Cash that populates this thread and others like it.

The Fed, which exerts enormous power over short-term interest rates, has repeatedly set its target for future inflation at 2%. Therefore, if you buy a CD that yields 2.06%, your expected after-inflation gain will almost certainly be around +0.06%. That miniscule real yield will be further reduced by federal, state, and local taxes that will eat away at your net gain.

Note also if future inflation rises even slightly above your current CD rate (something which has happened historically quite often), you will experience a net real decline, but will still have to pay taxes on your nominal gain.

My conclusion? CDs are a very clever mechanism that bankers use to transfer your money to their bank.

[ochotona]

1 year Treasuries are 1.56%, I think 2.06% for a 1 year CD is the better choice. No one is promising us any rose gardens here, we're just trying to make the least bad choices.

[jhogue]

A 3 month T bill sold for 1.56% on 11/21/19 at Fidelity. I think the 4 week was about the same.

With yields this low and the Treasury curve this flat, isn’t it pointless (and unnecessarily risky) to buy one year bank CDs instead of T-bills on auto-roll?

[dualstow]

by jhogue » Today, 3:26 pm \
I am alternately fascinated and perplexed by the endless hunt for yield in Cash that populates this thread and others like it.

I'm too lazy to chase yield, but I do enjoy reading the threads of those who chase it.

Setting aside the long bonds I bought for the vp, I have a small set of notes of various maturities that pay between 1 and 2% overall.
Some began life (in my holdings) as ten year notes, others as 5-years, and so on. Putting them in order by maturity date, there will be one reaching the finish line about every year or year and a half.

I used to think what a mistake it was to buy them. Now the yield is looking pretty good. I want to draw a tacky analogy, but I'll resist.
But, I like watching what was pathetic deep cash turn into pretty good cash.

The pp has notes paying 2.6% and 2.75%, hooray. But what happens when they mature? I'll probably be buying notes at 1% or VUSXX which is going down (the yield) every week. 1.71% compounded, right now.

[Kbg]

Agree with the lazy approach. My solution is a STT fund. You are always going to get the X yr average of the funds target.

[vnatale]

Agree with the lazy approach. My solution is a STT fund. You are always going to get the X yr average of the funds target.

"STT" = ??

Vinny

[drumminj]

"STT" = ??

Presumably "Short-term Treasury"

[Kbg]

"STT" = ??

Presumably "Short-term Treasury"

Yes

[jhogue]

by jhogue » Today, 3:26 pm \
I am alternately fascinated and perplexed by the endless hunt for yield in Cash that populates this thread and others like it.

I'm too lazy to chase yield, but I do enjoy reading the threads of those who chase it.

Setting aside the long bonds I bought for the vp, I have a small set of notes of various maturities that pay between 1 and 2% overall.
Some began life (in my holdings) as ten year notes, others as 5-years, and so on. Putting them in order by maturity date, there will be one reaching the finish line about every year or year and a half.

I used to think what a mistake it was to buy them. Now the yield is looking pretty good. I want to draw a tacky analogy, but I'll resist.
But, I like watching what was pathetic deep cash turn into pretty good cash.

The pp has notes paying 2.6% and 2.75%, hooray. But what happens when they mature? I'll probably be buying notes at 1% or VUSXX which is going down (the yield) every week. 1.71% compounded, right now.

dualstow,

Looking in the rear view mirror, your ten year ladder of CDs must seem like a sure-fire-no-brainer-strategy for any amount of cash up to the $250,000 FDIC limit. Low inflation and Trump’s tax cut didn’t hurt either.

Here’s the problem as I see it:

Domestic STTs and ITTs are now stuck in a lower-bound range of 1.5 - 1.8%, and trillions in negative yielding euro and Swiss franc bonds are piling ever higher in Europe. There is no way that you can build a new ladder of of ten year CDs going forward that will bring you the after-inflation and after-tax yield your old CD ladder did. Interest rates can stay the same or they can rise, but they cannot continue to fall at the rate they did over the last decade for the next decade.

[dualstow]

Who knows what the future holds, jhogue.
It's very tempting to just have a large stock-heavy vp with zaftig dividends.

[ochotona]

Who knows what the future holds, jhogue.
It's very tempting to just have a large stock-heavy vp with zaftig dividends.

DWX foreign dividend stock ETF yielding 3.3% now. I own this one.

[dualstow]

Nice

[Kbg]

Who knows what the future holds, jhogue.
It's very tempting to just have a large stock-heavy vp with zaftig dividends.

DWX foreign dividend stock ETF yielding 3.3% now. I own this one.

SCHD yields 3.18 (SEC yield) and no foreign currency risk...

[ochotona]

Who knows what the future holds, jhogue.
It's very tempting to just have a large stock-heavy vp with zaftig dividends.

DWX foreign dividend stock ETF yielding 3.3% now. I own this one.

SCHD yields 3.18 (SEC yield) and no foreign currency risk...

Yup, that's a good one too

[mathjak107]

no stock fund ever should be used as a proxy for cash and interest . dividends are not interest ...

they serve two different purposes ... stocks are stocks whether they distribute a piece of your share price back to you as a dividend or not . they are never a proxy for interest and the safety of cash instruments .

[dualstow]

no stock fund ever should be used as a proxy for cash and interest . dividends are not interest ...

they serve two different purposes ... stocks are stocks whether they distribute a piece of your share price back to you as a dividend or not . they are never a proxy for interest and the safety of cash instruments .

Totally agree. Not a proxy. All the same, I have cash in the vp that will probably become dividend stocks.
PP cash is sacrosanct with regard to both quality and proportion of the whole.

Even notes longer than 3-years don't belong in the pp cash section. They've got the quality, but they are just not cash.

[jhogue]

I haven’t bought a T-bill with a maturity longer than one year for several years now.

Unless you have some specific liability matching in mind, which would rather buy today?

-A one year Treasury bill at 1.64%, or ,
-A three year Treasury bill at 1.57%,.

[dualstow]

One of each, please.
Seriously, it depends on which way you think rates are going. I do in fact buy both.

[dualstow]

Looks like Ally checking's interest rate has dipped from 0.6% to 0.5%.

Vanguard treasury mm/VUSXX/Fund 0011 is down to 1.69% compounded.

[drumminj]

Even notes longer than 3-years don't belong in the pp cash section. They've got the quality, but they are just not cash.

What about a 5-year CD with a small early breakage penalty? Good as cash, no? (well, good as cash in any other bank account/instrument)

[dualstow]

I don't have a problem with it, even though I don't buy them. I guess I would have to try it to really know.
I would ask jhogue, though.