Gyroscopic Investing

Hi,

I'm new here.  I noticed that Harry Browne mentioned this treasury fund, DUSXX, in his book but there's been no discussion of it on here.  I wondered there was a reason for that, if no one thought it was a good place to park the cash or something ... ?

Welcome to the forum!

Money-market fund with 0.60% expense ratio and current yield of 0.00%... I don't see why I would put my cash into this fund. As it was discussed here many times a short-term Treasury bond fund or an ETF could be a better vehicle for your cash, for example Vanguard's VFISX or Fidelity's FSBIX.

Seems like both of those aim at 80% Treasuries, vs. the 100% HB recommended ...

foglifter wrote: Welcome to the forum!

Money-market fund with 0.60% expense ratio and current yield of 0.00%... I don't see why I would put my cash into this fund. As it was discussed here many times a short-term Treasury bond fund or an ETF could be a better vehicle for your cash, for example Vanguard's VFISX or Fidelity's FSBIX.

.60% is steep, but for some it might be worth it for the convenience.  I think it's better than an ETF and also better than VFISX or FSBIX. 

If you don't need to be able to write checks directly out of the account (which is what is nice about treasury only money market funds) than I think it's best just to buy one year tbills. 

I focus my attention on low-cost index providers such as Vanguard and iShares, so I never noticed DUSXX before.  I suspect other forum members do the same thing which is why the fund hasn't been discussed.

It looks like a fine T-bill money market fund.  As Adam said the .60 expense ratio is high, but not astronomical compared to that of CPFXX or FDLXX.

KevinW wrote:
It looks like a fine T-bill money market fund.  As Adam said the .60 expense ratio is high, but not astronomical compared to that of CPFXX or FDLXX.

It's actually higher than CPFXX (.48%).

Ok  ...  I guess I was just wondering why no discussion on one of Browne's specific recommendations.

Adam1226 wrote:

KevinW wrote:
It looks like a fine T-bill money market fund.  As Adam said the .60 expense ratio is high, but not astronomical compared to that of CPFXX or FDLXX.

It's actually higher than CPFXX (.48%).

Although the quoted fee is 0.6% they're waiving it at the moment, presumably to avoid the fund's return being negative.  They can stop waiving it at any time, but the effective ER seems to be 0%.

Adam1226 wrote:

foglifter wrote: Welcome to the forum!

Money-market fund with 0.60% expense ratio and current yield of 0.00%... I don't see why I would put my cash into this fund. As it was discussed here many times a short-term Treasury bond fund or an ETF could be a better vehicle for your cash, for example Vanguard's VFISX or Fidelity's FSBIX.

.60% is steep, but for some it might be worth it for the convenience.  I think it's better than an ETF and also better than VFISX or FSBIX. 

Adam, could you elaborate why you think it is better?

foglifter wrote:

Adam1226 wrote:

foglifter wrote: Welcome to the forum!

Money-market fund with 0.60% expense ratio and current yield of 0.00%... I don't see why I would put my cash into this fund. As it was discussed here many times a short-term Treasury bond fund or an ETF could be a better vehicle for your cash, for example Vanguard's VFISX or Fidelity's FSBIX.

.60% is steep, but for some it might be worth it for the convenience.  I think it's better than an ETF and also better than VFISX or FSBIX. 

Adam, could you elaborate why you think it is better?

Credit risk and interest rate risk are the reasons I don't like VFISX and FSBIX. 

VFISX is 80% US treasuries and 20% other stuff.  I don't why Vanguard does this, but it's probably to reach for yield. 

FSBIX doesn't currently do this, but it can.  It has the same 80/20 clause that Vanguard does, but they are currently not exercising it, and hold almost only Treasuries.  So you'd have to watch the fund closely.

Also, keep in mind that VFISX and FSBIX hold 1-5 years Treasuries, so there is some interest rate risk.  I therefore don't think that these funds are appropriate as the primary cash fund for the PP.  They are probably okay if you have enough cash somewhere else (like a treasury only money market fund) to use for rebalancing.

So the bottom line is there is both some credit risk and some interest rate risk with these funds.  I'd rather just pay a little bit to have exactly what I want. 

I don't use ETF's, because, quite frankly, I don't understand how they work, and I can't figure out if all of this concern surrounding counter party risk and ETF's is justified or not.