Gyroscopic Investing

If you absolutely have to hold cash with one of these two brokerages, what are the best funds to use?

VFISX?  I know this is one that engages is the 80/20% monkey business that Craig mentioned a few weeks ago, but...I don't really see any other options (the Fidelity short term treasury fund does the same thing as far as I can tell). 

Would it be better just to buy Treasury Bills within the Fidelity account (no comission)?

Adam1226 wrote: If you absolutely have to hold cash with one of these two brokerages, what are the best funds to use?

VFISX?  I know this is one that engages is the 80/20% monkey business that Craig mentioned a few weeks ago, but...I don't really see any other options (the Fidelity short term treasury fund does the same thing as far as I can tell). 

Would it be better just to buy Treasury Bills within the Fidelity account (no comission)?

Fidelity is best for Cash.

I believe Fidelity's short term Treasury Fund FSBIX (FSBAX) is 99% pure Treasuries.

http://fundresearch.fidelity.com/mutual ... /315911867

And, of course, buying Treasury Bills with the Fidelity is way better than Vanguard.

Also, Fidelity's non-Treasury cash management options are much wider than Vanguard's. Obviously I don't use a lot of those features with my PP, but just to give you an example, Fidelity let's you deposit checks right from the camera on an iPhone/Android phone.

http://personal.fidelity.com/products/c ... heck.shtml

The way I see it, Fidelity's cash management features are better because they want you to trade more often (so they can earn more commissions off of you). Whereas Vanguard's cash management options are worse because they want you fully invested in their index funds and they want to limit the number of times you touch those funds so that they can keep costs low.

Gumby wrote: I believe Fidelity's short term Treasury Fund FSBIX (FSBAX) is 99% pure Treasuries.

It looks like you're right, but it also says "normally investing at least 80% of assets in securities included in the Barclays Capital 1-5 Year U.S. Treasury Index."

Does that mean it could potentially do the same thing as the Vanguard funds, where 20% is in nontreasury stuff?

Adam1226 wrote:

Gumby wrote: I believe Fidelity's short term Treasury Fund FSBIX (FSBAX) is 99% pure Treasuries.

It looks like you're right, but it also says "normally investing at least 80% of assets in securities included in the Barclays Capital 1-5 Year U.S. Treasury Index."

Does that mean it could potentially do the same thing as the Vanguard funds, where 20% is in nontreasury stuff?

Yes. That's correct.

If it helps you at all, I have some FSBIX at Fidelity right now, but I won't keep it there long term. I mainly buy my Treasuries directly with Fidelity (with a little TreasuryDirect on the side to occasionally rotate excess cash out of my bank account with 4 week T-Bills when I don't want my bank account to get fat). I use Vanguard almost exclusively for my Total Stock Market allocation.

I would also recommend taking a look at LoneWolf's excellent post on Short Term Treasury ladders:

http://gyroscopicinvesting.com/forum/ht ... 081#p10081

Of course, the ladder is the better way to go, since you'll save yourself a good amount of expenses, over the long run. As LW points out, you can always liquidate your shortest duration Treasuries first if you need some cash.

The expenses of a Treasury fund may not seem like very much, but they will add up a fair amount over your lifetime — particularly when you consider the opportunity cost of the expenses (by not having that cash anymore to invest or compound).

Also... don't forget that interest income from Treasury bonds is exempt from state and local income taxes, but is subject to federal income taxes. The Treasury funds are exempt as well, depending on their makeup. I believe Fidelity's Treasury fund stayed pure in 2010, so it pretty much worked out the same as having the bonds directly.

None of Vanguard's or Fidelity's cash funds are perfect so it's a pick-your-poison sort of deal.  The Treasury MMF funds VUSXX and FDLXX both have the 80% language; VUSXX is still closed and FDLXX has a high expense ratio.  The short term funds VFISX and FSBAX also both say the 80% thing, though as craigr and Gumby noted, Vanguard really is buying non-Treasuries while Fidelity is not.  Who knows whether that's the usual state of affairs or a temporary anomaly.

Personally I don't like the T-bill ladder idea because I have busy periods at work when I wouldn't be able to manage trading individual bonds.  I worry that a big bill would mature and I wouldn't roll it over, and all that cash would sit in a riskier sweep account for a while.  So in my case maybe keeping cash in something that's 80+% T-bills 100% of the time seems better than 100% T-bills only when I'm on top of things.

Another option, which HB recommended, is just buying 1 year T Bills each January. That's pretty easy to stick to if you don't feel like keeping tabs on a ladder.

If I *had* too, I'd probably use Fidelity after reading this thread.
I have some money in VUSXX (Vanguard's treasury money market fund, as mentioned above).
But, in both brokerage houses, I hold most of my cash in ETF:SHY.

The thing about Fidelity is that they will call you up to offer you advice from time to time. Usually the advice is to push you into situations that will eventually cause you to rack up fees, for their bottom line. They spend a crap load of money on constantly improving user-end technology to facilitate your ability to make transactions. But when they see that you're entire portfolio is entirely composed of Treasuries — which they make no money off of — their heads must explode. I used to get these calls wondering if I needed help with my investments. I finally had to ask to be taken off of their call list. The good news is that they respected that request.

FYI, I believe Schwab offers free Treasury transactions as well.

Keep life simple. Buy the ETF- SHY from vanguard. Cost $2. Have a good day.

Gumby wrote: Another option, which HB recommended, is just buying 1 year T Bills each January. That's pretty easy to stick to if you don't feel like keeping tabs on a ladder.

That's what I'll end up doing.

It's a small amount of money.  I'm luck enough to keep most of it in the G-fund that the TSP offers. 

Thanks for the advice.