any ideas for a slightly higher yield than MM?

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any ideas for a slightly higher yield than MM?

Postby sambb » Sun Mar 31, 2013 5:52 pm

I have a lot of money in vanguard tax exempt US MM fund, but I am looking t get a slightly better yield. Is my best option to buy t-bills of 1 year or so? Anything I am not thinking of? (CDs of course are possible also)
THis is for a chunk of cash that is on the sidelines.
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Re: any ideas for a slightly higher yield than MM?

Postby stan1 » Sun Mar 31, 2013 6:00 pm

Standard list:
CDs
FDIC insured savings accounts/money market savings acounts
I-Bonds
Tax-Free Muni Bond Fund
Mattress

All but the last one yield better than 0.01%.
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Re: any ideas for a slightly higher yield than MM?

Postby john94549 » Sun Mar 31, 2013 7:35 pm

Could you elaborate with respect to "on the sidelines"? EF, strategic re-balancing fund, or (fill in the blank)?

For example, funds needed for immediate deployment intra-day in a brokerage account (think one of those "RBDs") might rule out certain products. On the other hand, funds not needed for a year or more might be in savings accounts, CDs, IBonds, etc., all offering an after-tax yield greater than .01%. In between are funds potentially needed for re-balancing, but not immediately (think "hitting a band"). In the latter case, a savings account would probably work, a CD might (or might not, depending on the break policy).
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Re: any ideas for a slightly higher yield than MM?

Postby tbradnc » Mon Apr 01, 2013 8:03 am

GE Demand Notes paying 1.10% for >$50k - check writing and ACH access

GE Term Notes - 1.15% - 1 year term

Duke Premier Notes - 1.51% >$50k - check writing and ACH access
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Re: any ideas for a slightly higher yield than MM?

Postby Valuethinker » Mon Apr 01, 2013 8:11 am

tbradnc wrote:GE Demand Notes paying 1.10% for >$50k - check writing and ACH access

GE Term Notes - 1.15% - 1 year term

Duke Premier Notes - 1.51% >$50k - check writing and ACH access


During the Credit Crunch GE was forced to seek expensive money from Warren Buffett. If the notes are issued by GE Financial then they have considerable credit risk.

I cannot recommend putting safe low risk money into the Notes of individual private companies.
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Re: any ideas for a slightly higher yield than MM?

Postby tbradnc » Mon Apr 01, 2013 8:14 am

Valuethinker wrote:
tbradnc wrote:GE Demand Notes paying 1.10% for >$50k - check writing and ACH access

GE Term Notes - 1.15% - 1 year term

Duke Premier Notes - 1.51% >$50k - check writing and ACH access


During the Credit Crunch GE was forced to seek expensive money from Warren Buffett. If the notes are issued by GE Financial then they have considerable credit risk.

I cannot recommend putting safe low risk money into the Notes of individual private companies.


Just curious - during that crunch did any investors in GE notes lose money?
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Re: any ideas for a slightly higher yield than MM?

Postby Valuethinker » Mon Apr 01, 2013 8:15 am

sambb wrote:I have a lot of money in vanguard tax exempt US MM fund, but I am looking t get a slightly better yield. Is my best option to buy t-bills of 1 year or so? Anything I am not thinking of? (CDs of course are possible also)
THis is for a chunk of cash that is on the sidelines.


1. the tax exempt nature makes this a unique investment. After tax, you are not likely to achieve a better return on a taxable instrument.

2. your best bet for better yield ex that is FDIC insured CDs, a ladder of maturities can pay a higher return. ibonds definitely (not so much the return, but relatively attractive albeit you can only buy a small amount each year).

3. yes T Bills are the safest thing there is. An alternative would be US ST government bond fund-- however there would be some loss of NAV if interest rates spiked up (roughly loss of NAV = -1 x modified duration x interest rate change. So if they went up 1% and the fund had a duration of 2.3 years, -2.3%, approximately).

What you don't want to do is 'reach' for yield, take a higher risk and wind up losing your safe capital. Equity is for risks.
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Re: any ideas for a slightly higher yield than MM?

Postby Valuethinker » Mon Apr 01, 2013 8:18 am

tbradnc wrote:
Valuethinker wrote:
tbradnc wrote:GE Demand Notes paying 1.10% for >$50k - check writing and ACH access

GE Term Notes - 1.15% - 1 year term

Duke Premier Notes - 1.51% >$50k - check writing and ACH access


During the Credit Crunch GE was forced to seek expensive money from Warren Buffett. If the notes are issued by GE Financial then they have considerable credit risk.

I cannot recommend putting safe low risk money into the Notes of individual private companies.


Just curious - during that crunch did any investors in GE notes lose money?


No. But the efforts that authorities made to bail out investors throughout the economy were extraordinary and there's no confidence they would (or could, given our discussion of MMFs and Dodd Frank on another thread) repeat the trick. Generally the principle now being followed in Europe is that in a bank bailout, the holders of notes and bonds from a financial institution get to take pain alongside the government bailout, and maybe also large depositors.

Also if you needed liquidity at some point the price of the GE notes plummeted, even though they were eventually redeemed. So 'safe' money suddenly became risky.

You have to think, with safe money, about what could go truly *wrong*. 2008-09 proved that the unthinkable can happen. We had people here who owned GM bonds and notes, the bailout led to 90% loss of value. On equities you know the risks, you are prepared for that volatility. Ditto bond funds. But on your cash reserves, you cannot afford to have those issues. If you can take risk there, it's better to cut your cash holdings and nudge your equity or bonds up a bit.
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Re: any ideas for a slightly higher yield than MM?

Postby Hexdump » Mon Apr 01, 2013 8:34 am

What we use is with Vanguard, VMLTX, Limited Term Tax Exempt.
It works the same way as the money market as far as being able to write checks on it.
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Re: any ideas for a slightly higher yield than MM?

Postby 1210sda » Mon Apr 01, 2013 8:38 am

Capital One Bank High Yield Checking Account.

Min Required is $5,000

1% on balance up to $100,000

Guaranteed rate for one year (after that , who knows)

May not be available in all states (??)

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Re: any ideas for a slightly higher yield than MM?

Postby Grt2bOutdoors » Mon Apr 01, 2013 9:19 am

stan1 wrote:Standard list:
CDs
FDIC insured savings accounts/money market savings acounts
I-Bonds
Tax-Free Muni Bond Fund
Mattress

All but the last one yield better than 0.01%.


I bonds
CD's
FDIC insured Savings accounts
Debt Paydown - when you have too much cash sloshing around, either do one of the 4 things above, otherwise invest.
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Re: any ideas for a slightly higher yield than MM?

Postby MN Finance » Mon Apr 01, 2013 10:45 am

sambb wrote:I have a lot of money in vanguard tax exempt US MM fund, but I am looking t get a slightly better yield. Is my best option to buy t-bills of 1 year or so? Anything I am not thinking of? (CDs of course are possible also)
THis is for a chunk of cash that is on the sidelines.


Obviously unless you give more information, you'll only get "ideas," not "advice" (maybe that's ok.)

You have "a lot" of money that is for what? If you're 30 yrs old and you have $50k for your emergency fund in cash, that's totally different than if you're 65 yrs old and have $500k in cash that you are depending on for retirement income... for ex.
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Re: any ideas for a slightly higher yield than MM?

Postby Phineas J. Whoopee » Mon Apr 01, 2013 3:07 pm

Valuethinker wrote:1. the tax exempt nature makes this [Vanguard Tax-Exempt Money Market Fund] a unique investment. After tax, you are not likely to achieve a better return on a taxable instrument.
...

Given its 28 March SEC yield of 1 basis point, I doubt there's any significant difference between it and any other yield-free investment, taxable or otherwise.

https://personal.vanguard.com/us/funds/snapshot?FundId=0045&FundIntExt=INT

The rest of your post I agreed with, which is why I didn't quote it. :?

PJW
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Re: any ideas for a slightly higher yield than MM?

Postby nisiprius » Mon Apr 01, 2013 6:14 pm

sambb, the only thing I want to say is "be careful." An awful lot of people would like something with "a slightly higher yield than money market funds" and there are and will be an awful lot of snake oil salespeople selling their products are being exactly that. There last few years have seen the rise and fall of an awful lot of investors who thought they were getting enhanced cash.

In fact, "Enhanced Cash" was the name of one of them. A GE very-short-term bond fund that said in the prospectus, which not too many people read, that it was not a money market fund, with a name that could easily have led investors to assume that it was. For something like an extra 0.5% of interest each year, they suffered a good deal of anxiety and, ultimately, a 4% loss.

"Auction rate securities" were another--practically forgotten now, I think.

The Fidelity Ultrashort Bond Fund was another. Pretty as a picture, that one--up to mid-2007. Imagine "shortening up your duration" with that one. Well, the duration IS only 0.27 years.

Image

And file Schwab YieldPlus in the same Pendaflex.

I tend to categorize my investments as "stocks," "bonds," and "cash," but what I really mean by them is high risk, low risk, and safe. I really think the best thing to do is keep the categories clean. Be sure your safe assets are really safe, first, and worry about yield second. Don't "stretch for yield" in the safe part of your portfolio, stretching for yield is what the stocks are for.
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Re: any ideas for a slightly higher yield than MM?

Postby PennySaved » Mon Apr 01, 2013 7:49 pm

Here are some other ideas:

I put some of my cash in peer-to-peer lending with Lending Club, starting with a couple hundred dollars at first in 2009 and now up to about $12,000. Returns have been all positive, more than standard savings rates, return is running now about 8%. I could sell notes on secondary market or withdraw the current cash return of principal and interest, which is about $400 per month. I currently am reinvesting the returns in new lending notes. Lending Club is offering $300 to each new investor that I can refer. So if you are interested trying out Lending Club with $300, contact me. You have to meet the following requirements to be a Lending Club lender: “ I currently reside in one of the following states: CA, CO, CT, DE, FL, GA, HI, ID, IL, KY, LA, ME, MN, MO, MS, MT, NH, NV, NY, RI, SC, SD, UT, VA, WA, WI, WV, or WY; I have an annual gross income of at least $70,000 ($85,000 if residing in CA) and a net worth (exclusive of home, home furnishings and automobile) of at least $70,000 ($85,000 if residing in CA); or a net worth of at least $250,000(determined with the same exclusions) ($200,000 if residing in CA), OR, if I live in Kentucky, that I am an "Accredited Investor" as determined pursuant to Rule 501(a) of Regulation D under the Securities Act of 1933, AND, I will not purchase notes in an amount in excess of 10% of my net worth, determined exclusive of my home, home furnishings and automobile and if I live in California and do not satisfy any of the above tests, I will not invest more than $2,500 in Notes “

I did have a small account with Prosper (also peer-to-peer lending) that did OK, but took money out when they stopped lending for a while back in 2009?. I may get back in now that business looks better for them.

I just put $4500 into a savings account attached to Paypal Prepaid debit card. It is supposed to pay about 5% for up to $5000 max. I think I will avoid the $5 per month debit card fee if I keep no balance on the debit card. The only way to get the money out is by using the debit card. Or you can close the whole account for a $10 fee, I think and they will send you a check.

I am in the process of doing the similar thing with the Mango prepaid debit card. I can get 6% interest up to $5000 on a savings account attached to the card. There is a $5 fee per month for the card, which is charged whether or not there is a balance on the card, unless you direct deposit $500 per month which I am trying out. I am supposed to get a $20 bonus for signing up for direct deposit. I plan on getting the $500 out of the account every month by buying a money order at the post office for $1.90 (cheaper than the $5.00) and depositing money order into my checking account at another institution. Both of these prepaid cards can be funded from my PayPal account.

There is a third prepaid debit card with savings account at a good rate that I might go for, once I see how these first two work out.

I also have a rewards checking account with a credit union that started out at 4% a few years back and is now down to 1.5%. I can get that rate up to $25,000 if I do direct deposit, electronic statements and make 12 debit purchases a month.

I am willing to jump through a few hoops and do some work to get extra cash.

I have cash in T Rowe Price Virginia Tax-Exempt Fund, Vanguard Intermediate Term Tax Exempt and Vanguard Intermediate Term Investment Grade. Also bought $10,000 worth of I-bonds per year for the last three years.

I also have an American Express (online only) savings account that is paying 0.9%
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Re: any ideas for a slightly higher yield than MM?

Postby tbradnc » Mon Apr 01, 2013 8:00 pm

Barclays is currently offering 1.00% APY for online savings...

https://www.banking.barclaysus.com/online-savings.html
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Re: any ideas for a slightly higher yield than MM?

Postby Coinsinthefountain » Mon Apr 01, 2013 8:21 pm

I don’t know how much cash you have on the sidelines but over a year ago my auto parts dealer tipped me off to premier checking account at a local credit union (Union Square) that pays 3.51 percent on $15,000 and .50 percent on amounts above that. The wife and I got such an account. Then I got one in my own name. The only negative is that you must use their credit card 12 times monthly. This isn’t a problem for us as we charge everything and pay the balance off monthly. That’s $30,000 earning 3.51. We could get another account in my wife’s name if we wanted and up the amount to $45,000. As to banks, we found one FDIC in Amarillo, Texas paying 1.99 percent and latched onto that. I’ve switched brokerages to pick up $300 and took Chase up on $200 in free money if I would open a $1,500 account. It’s a bit of a pain but it all adds up.
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Re: any ideas for a slightly higher yield than MM?

Postby Scooter57 » Tue Apr 02, 2013 10:44 am

I had a great deal of money in the Vanguard MM fund after winding down some high expense investments I inherited. Much of it is now in a CD ladder with rates from 1.25 to 2.07% and maturities of 6 mos to 5 years. The CDs can all be broken and if they are I only lose 6 months interest, which at current rates is very little. There's no loss of principal.

This isn't a time to get greedy about yield. Rates will go up, eventually, to a more characteristic range and then you will be able to invest for income far more safely.

Fed intervention has pushed rates down to a level that has only been seen in 2 years since the 1870s. The only way in which these rates could continue for more than another year or two is if our economy totally stagnates and if you and more of your friends and neighbors lose their jobs. If that happens, and we have deflation, you will be very glad to still have your money even with no yield as all other investments are likely to lead to capital losses.

To take significant capital risks for 1 or 2% of gain strikes me as nuts. We are supposed to be getting paid a risk premium for giving other's the use of our money. Typically they paid us 5-7% for that privilege. A rate that could double our money in 10-14 years and make up for any temporary NAV fluctuations. If you lock in a 1% rate it will take you 72 years to double your money!
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Re: any ideas for a slightly higher yield than MM?

Postby Quasimodo » Tue Apr 02, 2013 5:59 pm

It’s easy for me to rationalize market timing while forgetting that I have to do it twice, once getting in and again getting out. Oh, and I need to forget about my track record - it’s awful.

Then I probably should ask myself “Am I really the only one who has thought of this?”

Maybe I'm better off reminding myself of all the bad timing moves I’ve made in the past, while just sticking with my asset allocation plan.

Meanwhile I’ll fantasize about Ginnie Mae bond funds...

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Re: any ideas for a slightly higher yield than MM?

Postby Archie Sinclair » Tue Apr 02, 2013 9:13 pm

Use a bank or credit union.

Money market funds were created as a higher-yielding alternative to bank accounts. The alternative to the alternative is the original.
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