Gyroscopic Investing

Given that 60% of our assets are in a Fidelity 401K, is FSBIX (Fidelity Spartan Short-Term Treasury Fund) okay for some/all of the cash?

So far have not found any Treasury money-market fund, have most cash in FRTXX (Fidelity Retirement Money Market), which I don't think is good, right?

Specifically, thinking of moving some/all of what's in FRTXX into FSBIX.

Thanks for the hand-holding.

FSBIX seems to have more volatility relative to SHY, but it's in the same ballpark.  You could put half or 2/3's of your cash allotment into FSBIX and keep the other half/third in the MM, which will smooth your volatility a little.

The difference between SHY and FSBIX is that SHY holds 1-3 year treasuries while FSBIX holds 1-5 year treasuries.  So FSBIX is slightly more sensitive to interest rate changes.

For the cash portion I am more comfortable taking on a bit of interest rate risk than I am taking credit risk.  So given the choice I would rather use FSBIX than a fund full of commercial paper.  FRTXX is only 7% treasuries which gives me pause.

If I were at Fidelity I'd probably use a mix of FSBIX and FDLXX (treasury MMF).  In practical terms any other money market fund would probably be fine, but if FDLXX isn't available, I'd pick whichever MMF holds the highest proportion of treasuries.

I use FSBIX for about half my cash and use HABDX for the other half.  But then, I'm not a purist and I've run enough models to give an idea of the risks and draw down, and am comfortable with it.  Plus, Gold is a recession hedge as well, thus functions as cash does during recessions, in most cases.

Given cash is a currency, thus must have velocity to be of use, and Gold is money, thus a store of wealth, I keep less cash on hand and use the intermediate Bond fund to grow the portfolio.  Again - I'm not a purist and feel comfortable doing this.  It's up to you to do what you feel comfortable with.

KevinW wrote: For the cash portion I am more comfortable taking on a bit of interest rate risk than I am taking credit risk. 

Me too. 

Why use FSBIX instead of short term T-bills through Treasury Direct?  Eliminates the (small) counter-party risk.

I agree FSBIX is a good choice cash choice if you are ok with a little more interest rate risk. It's one of the better ST treasury funds out there.

I meant to ask what the advantage is of using FSBIX (or another short term Treasury fund) instead of just buying your own Treasury bills (1 year?) from Treasury Direct.

Mitch,

Simplicity and use in tax deferred space.  Also, I believe TD doesn't allow you to sell bonds in a pinch.  You could sell the fund in a pinch if you wanted.