How do you invest the Cash portion?

Discussion of the Cash portion of the Permanent Portfolio

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vnatale
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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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Re: How do you invest the Cash portion?

Post by vnatale » Tue Sep 10, 2019 7:31 pm

What are you defining as "the core"?

Thanks

Vinny
dualstow wrote:
Fri Jul 05, 2019 7:35 am
Vanguard Treasury Money Market for the core;
ladder of treasury bills and short-term treasury notes bought directly thru Vanguard.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: How do you invest the Cash portion?

Post by vnatale » Tue Sep 10, 2019 7:33 pm

Thank you for the response. And regarding point #2 below. I fully understand that a major component of the Permanent Portfolio is safety with cash, thus the many exhortations to invest strictly in U.S. Treasury securities. I would NOT be tempted to chase cash.

Vinny
jhogue wrote:
Fri Jul 05, 2019 2:57 pm
Welcome to the forum.

I think the above suggestions will probably work out just fine for you.

That said, consider the following points:

1. Keep in mind that the purpose of Cash in the PP is to always hold the safest and most liquid asset possible in case one of the three volatile assets exceeds its 35/15 bands and needs to be rebalanced. Cash will smooth out your portfolio returns over time.

2. Investors in the HBPP have discovered that one of the four assets will almost invariably lags the others. Right now, that lagging asset is Cash. That makes it tempting to make the mistake of chasing yields in Cash by trying to substitute higher-yielding securities like unbreakable CDs or intermediate term Treasurys in place of more liquid, shorter-duration Treasurys. Don’t do it.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: How do you invest the Cash portion?

Post by anato » Wed Sep 11, 2019 2:14 pm

vnatale wrote:
Tue Sep 10, 2019 7:20 pm
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?
Yep, I try to overpay taxes. Then $10k for each one of me, my wife and 2 kids... so plenty of room there. It would mean my additional contributions for the year are north of $200k (never happened :-\)
vnatale wrote:
Tue Sep 10, 2019 7:20 pm
2) Can you give more description of: "1-3-6 months TBills in auto-roll at Fidelity"
Just that: I buy TBills at Fidelity, and I select auto-roll, so then they mature Fidelity uses the proceedings to buy more of the same duration.
vnatale wrote:
Tue Sep 10, 2019 7:20 pm
3) Obviously you have no concern regarding FDLXX when I wrote:
No concerns, as close as cash I can get without having to bother selling TBills for each and every expense.
vnatale wrote:
Tue Sep 10, 2019 7:20 pm
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."
They are iShares ETFs, which trade for free at Fidelity
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Re: How do you invest the Cash portion?

Post by dualstow » Wed Sep 11, 2019 2:37 pm

Just the bulk of holdings. I don’t keep a fixed percent in one or the other. When the auction for 2-yr notes came out earlier this year I jumped on it because the potential rate was 2.75%*.
I like the treasury money market because I can sell notes to the sweep account and then the the next day purchase stocks, gold, bonds or cash. I tend to hold all bills and notes to maturity, although it would be easy enough to sell the if I were in a jam.

*9128285B2 2-year notes. Know that the advertised rate for an auction issue is merely a guideline. You don’t know what you’ve got until the auction is done. That’s why — as I said in the response to your pm — many people prefer the secondary market. I think we have a stickied guideline to buying treasuries, btw.
vnatale wrote:
Tue Sep 10, 2019 7:31 pm
What are you defining as "the core"?

Thanks

Vinny
dualstow wrote:
Fri Jul 05, 2019 7:35 am
Vanguard Treasury Money Market for the core;
ladder of treasury bills and short-term treasury notes bought directly thru Vanguard.
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Re: How do you invest the Cash portion?

Post by vnatale » Mon Oct 07, 2019 7:57 pm

I finally got the answer to one question I'd been asking various places. Can one use Treasury Direct within a retirement account? And, the answer was NO.

Therefore, with my belief that income producing investments (such as Cash) should be in retirement accounts that means I would not be able to buy I Bonds for placement in those retirement accounts.

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.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: How do you invest the Cash portion?

Post by vnatale » Mon Oct 07, 2019 8:00 pm

A few questions for you...

1) First the oddball one. How do you get current news to appear under your posts -- even long after you have composed them?

2) I have read here how some people have created automatic ladders in Fidelity. I did call Vanguard (my investment company exclusively) to learn all about buying bills and bonds through them. They did not seem to offer any form of automatic buying? Is that true? You have to manually make your own ladders?

Thanks

Vinny
dualstow wrote:
Fri Jul 05, 2019 7:35 am
Vanguard Treasury Money Market for the core;
ladder of treasury bills and short-term treasury notes bought directly thru Vanguard.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: How do you invest the Cash portion?

Post by vnatale » Mon Oct 07, 2019 8:07 pm

As I just stated, if my belief that an income producing investment such as cash belongs in a retirement account then that eliminates any I bonds as Treasury Direct does not work with retirement accounts.

Since you are with both Vanguard and Fidelity and use do autoroll at Fidelity can you verify that Vanguard does not seem to offer the autoroll feature. When I talked to them a short while ago about the mechanics of buying bills and bonds they did not seem to bring up the autoroll feature. It seemed like it was all up to the investor to do it manually.

And, again, if I'm going by the pure prescription of owning cash from Tex's and Craig's book, which I believe to be 100% Treasury / one year then it seems the best options are Vanguard's US Treasury money market fund or buying various T-Bills which have maturities no longer than a year. In this area I am definitely prizing ultimate safety over any form of yield improvement. Therefore, that would seem to basically eliminate your first and third third, leaving only your middle third.

But thanks for the detailed, thorough explanation!

Vinny
sophie wrote:
Sat Jul 06, 2019 2:29 pm
Check out the numerous threads on cash. There are so many options it's ridiculous. It depends on your time horizon, tax situation, and how much you value simplicity. One approach is to divide your cash allocation into thirds: the top third is easily accessible cash (savings account, money market fund), the bottom "deep" third can be long-term holdings like Series I bonds or 5 year CDs, and the middle third is, well, middle (e.g. autorolled Treasury bills).

I happen to have high state/local taxes, so the highest yield for me right now is the one month Treasury bill, which I hold at Fidelity on autoroll. I use treasury money markets (Vanguard and Fidelity) and series I savings bonds also.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: How do you invest the Cash portion?

Post by vnatale » Mon Oct 07, 2019 8:10 pm

You do raise another question that I have. In my most recent response, I stated that I'm valuing ultimate safety over any yield improvement.

However, it seems that I am / would be tempted by the $500 bonus. That would exceed all the income earned on a 2%, $20,000 investment for a full year, which would be $400.

Seems like an way to easily earn a not so small amount of money with not much work.

Vinny
dualstow wrote:
Sat Jul 06, 2019 5:36 pm
ochotona wrote:
Sat Jul 06, 2019 9:18 am
I'm disappointed Ally's savings rate went down to 2.10%,
TD sent me an offer of a $500 bonus if I deposit 20K. So 2.5% After that, the savings rate is 0.10% I looked up Ally’s rate because I have checking with them and thought, ooh, 2.10%, not bad. (There are other offerings from TD that are higher, but without the bonus, I think).

Not really worth opening and closing accounts.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: How do you invest the Cash portion?

Post by vnatale » Mon Oct 07, 2019 8:12 pm

Thanks for well putting into words my basic agreement with all you stated!

Vinny
jacksonM wrote:
Sun Jul 07, 2019 6:57 pm
T bills for me too. Some of it is in various money market accounts at Fidelity and Vanguard for convenience sake but basically if I have a big bunch of cash it goes into T-Bills.

As for why I do this, it's because that was what HB suggested in his book and also the authors of the newer book by the folks who originally started this forum. They seemed to have spent more time thinking about these kinds of things than me and showed facts and figures for why it worked in the overall scheme of things so I didn't see any reason to delve any further to come up with my own plans.

Especially true nowadays when the best you can hope for with cash beyond what they recommended is is a minuscule improvement that doesn't really justify the risk of doing something else.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: How do you invest the Cash portion?

Post by ochotona » Fri Oct 25, 2019 7:19 pm

Does anyone use SHV for cash?
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Re: How do you invest the Cash portion?

Post by dualstow » Fri Oct 25, 2019 9:08 pm

My apologies. I just saw this post for the first time and realized it was for me.
vnatale wrote:
Mon Oct 07, 2019 8:00 pm
A few questions for you...

1) First the oddball one. How do you get current news to appear under your posts -- even long after you have composed them?

2) I have read here how some people have created automatic ladders in Fidelity. I did call Vanguard (my investment company exclusively) to learn all about buying bills and bonds through them. They did not seem to offer any form of automatic buying? Is that true? You have to manually make your own ladders?

Thanks

Vinny
dualstow wrote:
Fri Jul 05, 2019 7:35 am
Vanguard Treasury Money Market for the core;
ladder of treasury bills and short-term treasury notes bought directly thru Vanguard.


Ans.:
1) That’s just the signature line. Go to the Control Panel where you uploaded your avatar but edit the signature instead of the avatar. Start by clicking the person icon at the top right of this forum / User Control Panel (ignore the word Profile below) / Now choose the Profile tab / Edit Signature.

2) No Vanguard ladder as far as I know, although I haven’t really explored.
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Re: How do you invest the Cash portion?

Post by mathjak107 » Sat Oct 26, 2019 3:05 am

ochotona wrote:
Fri Oct 25, 2019 7:19 pm
Does anyone use SHV for cash?
i like shv for cash ... shy is to bond related when rates rise ....shy is nice when the trend is down but it moves to much when rates go up up.

as it is gold and long term rates seem to move together . i would not want anymore correlated movement by using shy . shv is far less rate sensitive then shy .
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Re: How do you invest the Cash portion?

Post by sophie » Sun Oct 27, 2019 11:07 am

ochotona wrote:
Fri Oct 25, 2019 7:19 pm
Does anyone use SHV for cash?
I don't use ETFs for cash, but it's mainly because they are a PITA to trade. Plus I've experienced a bit of float with share values. Much prefer money market funds pegged at $1/share and straight up T bills.

Also, VUSXX (Vanguard treasury-only MM) blows SHV away on the expense ratio (0.09% vs 0.15%). I wish FDLXX (Fidelity's treasury MM) would come down from its eye-popping 0.42%.
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Re: How do you invest the Cash portion?

Post by dualstow » Sun Oct 27, 2019 1:06 pm

VUSXX/#11 is the greatest.
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Re: How do you invest the Cash portion?

Post by mathjak107 » Sun Oct 27, 2019 2:01 pm

Market watch shows vusxx at 2.23 and shv at 2.22 expenses included ........hardly worth me dealing with vanguard for
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Re: How do you invest the Cash portion?

Post by dualstow » Sun Oct 27, 2019 2:45 pm

mathjak107 wrote:
Sun Oct 27, 2019 2:01 pm
Market watch shows vusxx at 2.23 and shv at 2.22 expenses included ........hardly worth me dealing with vanguard for
Vanguard is paying 1.87% compounded minus the 0.09% ER per their own site.
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Re: How do you invest the Cash portion?

Post by mathjak107 » Mon Oct 28, 2019 3:06 am

be careful comparing yields ... first off the sec yield on money markets is a 7 day average ... the sec yield on etf's like shv are based on the last 30 days ending on the last day of the last month . plus shv can have capital appreciation . so i would not compare a money market to shv and then rule out shv because of a higher expense ...you are not even comparing the same duration holdings so it can not be an apple to apple comparison ..

my shv has outperformed my money market .
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Re: How do you invest the Cash portion?

Post by sophie » Mon Oct 28, 2019 6:54 am

dualstow wrote:
Sun Oct 27, 2019 1:06 pm
VUSXX/#11 is the greatest.
Yes indeed!!!! (What's #11?)

Another advantage of VUSXX over an ETF: you can print out and mail in a form to Vanguard, and they'll send you free checks. Gives you another way to access the cash in VUSXX: write a check.

Which I might end up doing soon enough...had a big plumbing leak last night under my sink and the downstairs neighbor got water pooling on her lovely gourmet wood kitchen cabinets. The super shut off the water in my kitchen so I have to do dishes in the bathtub for now. Yikes.
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Re: How do you invest the Cash portion?

Post by mathjak107 » Mon Oct 28, 2019 4:15 pm

We do all bill paying ,transfers and coordination of our finances through fidelity .....so all check writing goes through the core .we can shift money from shv , but I look at them as two separate functions ....shv holds cash that is like a stock option with no expiration date to buy assets at lower prices .....so it has a different function than our money market core.

If the flood was not your fault liability wise you are not responsible for damage ...my son had a sink pipe break and flood downstairs ...since he never touched the original sink or pipe he was found not responsible for any damages below
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Re: How do you invest the Cash portion?

Post by dualstow » Tue Oct 29, 2019 7:07 am

sophie wrote:
Mon Oct 28, 2019 6:54 am
dualstow wrote:
Sun Oct 27, 2019 1:06 pm
VUSXX/#11 is the greatest.
Yes indeed!!!! (What's #11?)

Another advantage of VUSXX over an ETF: you can print out and mail in a form to Vanguard, and they'll send you free checks. Gives you another way to access the cash in VUSXX: write a check.

Which I might end up doing soon enough...had a big plumbing leak last night under my sink and the downstairs neighbor got water pooling on her lovely gourmet wood kitchen cabinets. The super shut off the water in my kitchen so I have to do dishes in the bathtub for now. Yikes.
- #11 is the fund number. I often search for this fund with the ticker if i use google, but with the fund number if I’m on Vanguard’s own site. I find it easier to remember the numbers for some reason. I’m definitely more word-oriented than math-inclined, but these non-word tickers are easy to mix up.

- Checks: yes! Sometimes I use Vanguard checks to pay taxes.

- sorry to hear about the plumbing and your neighbor’s cabinets! I now feel a little less bad about myself, having discovered that a family of birds has made a home in the wood just below my roof. Misery loves company.
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Re: How do you invest the Cash portion?

Post by sophie » Tue Oct 29, 2019 9:09 am

Thanks dualstow, I learned something new about Vanguard today. Sorry to hear about your roof issue and hope it's not too expensive! Thinking it might be worth it in the long run to put in a leak detector under the sink.

BTW if anyone is interested in buying a new faucet, here's a big sale at efaucets.com right now.
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Re: How do you invest the Cash portion?

Post by dualstow » Tue Nov 05, 2019 7:55 am

sophie wrote:
Tue Oct 29, 2019 9:09 am
...
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.
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Re: How do you invest the Cash portion?

Post by vnatale » Tue Nov 05, 2019 12:26 pm

dualstow wrote:
Tue Nov 05, 2019 7:55 am
sophie wrote:
Tue Oct 29, 2019 9:09 am
...
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
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Re: How do you invest the Cash portion?

Post by ochotona » Tue Nov 05, 2019 12:40 pm

vnatale wrote:
Tue Nov 05, 2019 12:26 pm

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.
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