Best Place to Park Over $1m in Cash

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TheodoreMonit
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Best Place to Park Over $1m in Cash

Post by TheodoreMonit » Mon Apr 24, 2017 9:25 am

Does anyone have any ideas for the best places to park cash (not in stocks and bonds directly) if over $1m-$2m while I am waiting to create the right portfolio allocation and DCA in? I'm not interested in having a bunch of online bank accounts maxed out at $250k each - I played that game once and the teaser interest rates went down to nothing (sneaky) over time and they started hitting me with account dormancy fees and threats of closing the accounts because I was just letting them sit with no deposits or withdrawals. Too much hassle and too much consolidation happened with the banks putting FDIC limits in a precarious position - I think 4 of the online banks I chose were acquired by other banks I already had accounts at and the ones at the same banks then were over the $250k FDIC limits.

For people here with a ton of cash, do you use let's say Fidelity or Vanguard money market funds, treasury funds, etc.? I'm looking for something with same day liquidity with the aim to maintain a $1 NAV while offering a decent (I know it will probably max out at 0.85-0.90%) yield.

If you had $5m in cash, where would you put it?

Thanks!

Gill
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Re: Best Place to Park Over $1m in Cash

Post by Gill » Mon Apr 24, 2017 9:29 am

US Treasury Bills.
Gill

Jack FFR1846
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Re: Best Place to Park Over $1m in Cash

Post by Jack FFR1846 » Mon Apr 24, 2017 9:33 am

What would I do personally? I guess I'd open a brokerage account at Fidelity or TDAmeritrade (whoever had the highest bonus for this amount of money) and put it into the funds that I plan to end up with. Sorry, DCA makes no sense to me. Either you want to invest the money or you don't.

I have over $1M with Fidelity and another $1M other places.
Bogle: Smart Beta is stupid

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simplesimon
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Re: Best Place to Park Over $1m in Cash

Post by simplesimon » Mon Apr 24, 2017 9:35 am

Vanguard's Prime Money Market Fund sounds like the right place for you. 0.93% SEC yield (0.99% for admiral shares with a minimum of $5 million).

TheodoreMonit
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Re: Best Place to Park Over $1m in Cash

Post by TheodoreMonit » Mon Apr 24, 2017 9:37 am

Gill wrote:US Treasury Bills.
Gill
Thanks Gill. Do you invest in T-bills directly or use some sort of fund?

TheodoreMonit
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Re: Best Place to Park Over $1m in Cash

Post by TheodoreMonit » Mon Apr 24, 2017 9:40 am

Jack FFR1846 wrote:What would I do personally? I guess I'd open a brokerage account at Fidelity or TDAmeritrade (whoever had the highest bonus for this amount of money) and put it into the funds that I plan to end up with. Sorry, DCA makes no sense to me. Either you want to invest the money or you don't.

I have over $1M with Fidelity and another $1M other places.
Thanks for the thoughts. I already have around 60% of my NW invested in equities/bonds. Just looking to park cash and be selective about what to invest the additional cash in when I feel comfortable with some buying opportunities that present themselves. There's no big rush for me to invest all of the rest of my cash at one time. I'm also sniffing around some rental properties (just investigating for now) but want to keep my options open, hence the large cash position.

TheodoreMonit
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Re: Best Place to Park Over $1m in Cash

Post by TheodoreMonit » Mon Apr 24, 2017 9:40 am

simplesimon wrote:Vanguard's Prime Money Market Fund sounds like the right place for you. 0.93% SEC yield (0.99% for admiral shares with a minimum of $5 million).
Looks good, thanks!

Gill
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Re: Best Place to Park Over $1m in Cash

Post by Gill » Mon Apr 24, 2017 9:41 am

TheodoreMonit wrote:
Gill wrote:US Treasury Bills.
Gill
Thanks Gill. Do you invest in T-bills directly or use some sort of fund?
I'd buy them direct and then sell them off as you need funds. Complete safety and liquidity.
Gill

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knpstr
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Re: Best Place to Park Over $1m in Cash

Post by knpstr » Mon Apr 24, 2017 9:42 am

Warren Buffett would suggest short-term Treasuries as well.
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dm200
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Re: Best Place to Park Over $1m in Cash

Post by dm200 » Mon Apr 24, 2017 9:43 am

TheodoreMonit wrote:Does anyone have any ideas for the best places to park cash (not in stocks and bonds directly) if over $1m-$2m while I am waiting to create the right portfolio allocation and DCA in? I'm not interested in having a bunch of online bank accounts maxed out at $250k each - I played that game once and the teaser interest rates went down to nothing (sneaky) over time and they started hitting me with account dormancy fees and threats of closing the accounts because I was just letting them sit with no deposits or withdrawals. Too much hassle and too much consolidation happened with the banks putting FDIC limits in a precarious position - I think 4 of the online banks I chose were acquired by other banks I already had accounts at and the ones at the same banks then were over the $250k FDIC limits.
For people here with a ton of cash, do you use let's say Fidelity or Vanguard money market funds, treasury funds, etc.? I'm looking for something with same day liquidity with the aim to maintain a $1 NAV while offering a decent (I know it will probably max out at 0.85-0.90%) yield.
If you had $5m in cash, where would you put it?
Thanks!
If convenience and having it in one place were important, and if all was not needed immediately, I would seriously consider:

1. What I needed immediate access: Vanguard Prime MM Fund Federal MM Fund (settlement fund as well)

2. Ladder of Vanguard Brokered CDs - limiting holding in any one FDIC insured bank to $250,000.

aristotelian
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Re: Best Place to Park Over $1m in Cash

Post by aristotelian » Mon Apr 24, 2017 9:45 am

How long are you looking to DCA into the market? You could do a CD ladder over that period. You would know the rate you are getting so you would not get burned by rate changes. I do not have nearly your amount of cash on hand, but I do money market and CD's for known upcoming purchases/investments over 1-2 year timeframe.

TheodoreMonit
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Re: Best Place to Park Over $1m in Cash

Post by TheodoreMonit » Mon Apr 24, 2017 9:49 am

knpstr wrote:Warren Buffett would suggest short-term Treasuries as well.
Thanks!

TheodoreMonit
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Re: Best Place to Park Over $1m in Cash

Post by TheodoreMonit » Mon Apr 24, 2017 9:51 am

dm200 wrote:
TheodoreMonit wrote:Does anyone have any ideas for the best places to park cash (not in stocks and bonds directly) if over $1m-$2m while I am waiting to create the right portfolio allocation and DCA in? I'm not interested in having a bunch of online bank accounts maxed out at $250k each - I played that game once and the teaser interest rates went down to nothing (sneaky) over time and they started hitting me with account dormancy fees and threats of closing the accounts because I was just letting them sit with no deposits or withdrawals. Too much hassle and too much consolidation happened with the banks putting FDIC limits in a precarious position - I think 4 of the online banks I chose were acquired by other banks I already had accounts at and the ones at the same banks then were over the $250k FDIC limits.
For people here with a ton of cash, do you use let's say Fidelity or Vanguard money market funds, treasury funds, etc.? I'm looking for something with same day liquidity with the aim to maintain a $1 NAV while offering a decent (I know it will probably max out at 0.85-0.90%) yield.
If you had $5m in cash, where would you put it?
Thanks!
If convenience and having it in one place were important, and if all was not needed immediately, I would seriously consider:

1. What I needed immediate access: Vanguard Prime MM Fund Federal MM Fund (settlement fund as well)

2. Ladder of Vanguard Brokered CDs - limiting holding in any one FDIC insured bank to $250,000.
The Vanguard funds look good. I have never done CD laddering before mainly because the Fidelity tool crashes when I try to build one but I think it is time to open a Vanguard account. Thanks for the idea!

TheodoreMonit
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Re: Best Place to Park Over $1m in Cash

Post by TheodoreMonit » Mon Apr 24, 2017 9:54 am

aristotelian wrote:How long are you looking to DCA into the market? You could do a CD ladder over that period. You would know the rate you are getting so you would not get burned by rate changes. I do not have nearly your amount of cash on hand, but I do money market and CD's for known upcoming purchases/investments over 1-2 year timeframe.
CD laddering is a smart idea. Re: DCA, first, I want to study my real asset allocation over the next few weeks as I consolidate all accounts from current wealth team to my personal brokerage (merging their positions with my positions) and take a few weeks to build the right AA. Probably DCA over 4 quarters (one investment each quarter). That way, I will still maintain some liquidity if an interesting real estate or other investment comes my way.

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dm200
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Re: Best Place to Park Over $1m in Cash

Post by dm200 » Mon Apr 24, 2017 9:59 am

The Vanguard funds look good. I have never done CD laddering before mainly because the Fidelity tool crashes when I try to build one but I think it is time to open a Vanguard account. Thanks for the idea!
Not sure what a laddering tool would do that you could not just do yourself with such large sums. Be aware that the rates and offerings of brokered CDs can vary quite a bit from one day to another. So, before buying, say, a 12 month term CD - watch a few days. Also seacrh for 13 or 14 month - sometimes quite a rate difference for a month or two. Also consider secondary market purchases that sometimes offer a better deal.

TheodoreMonit
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Re: Best Place to Park Over $1m in Cash

Post by TheodoreMonit » Mon Apr 24, 2017 10:03 am

dm200 wrote:
The Vanguard funds look good. I have never done CD laddering before mainly because the Fidelity tool crashes when I try to build one but I think it is time to open a Vanguard account. Thanks for the idea!
Not sure what a laddering tool would do that you could not just do yourself with such large sums. Be aware that the rates and offerings of brokered CDs can vary quite a bit from one day to another. So, before buying, say, a 12 month term CD - watch a few days. Also seacrh for 13 or 14 month - sometimes quite a rate difference for a month or two. Also consider secondary market purchases that sometimes offer a better deal.
Great advice, thanks!

inbox788
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Re: Best Place to Park Over $1m in Cash

Post by inbox788 » Mon Apr 24, 2017 10:05 am

If you had $5M in cash, you just lost $50,000 in opportunity cost today (SP500 up > 1%).

I'd put a large chunk in the market (VTSMX) and bonds (BND) right away. Use tax-exempt in taxable accounts and some short term bonds if you're very worried about interest rates.

I'd try to keep it under 5 investments since if you're doing more, you might as well look into opening up a bunch of CDs and high interest savings. Varying the titling allows more than the 250k at each institution.

It all depends on how long you plan on sitting on this cash. I'd probably be itching to spend some.

Fclevz
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Re: Best Place to Park Over $1m in Cash

Post by Fclevz » Mon Apr 24, 2017 10:21 am

TheodoreMonit wrote:I'm not interested in having a bunch of online bank accounts maxed out at $250k each
If you already have a Fidelity account and are primarily worried about FDIC insurance, their cash management account is actually FDIC insured up to $1.25 million, as they automatically sweep your cash into five different banks.

TheodoreMonit
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Re: Best Place to Park Over $1m in Cash

Post by TheodoreMonit » Mon Apr 24, 2017 10:34 am

inbox788 wrote:If you had $5M in cash, you just lost $50,000 in opportunity cost today (SP500 up > 1%).

I'd put a large chunk in the market (VTSMX) and bonds (BND) right away. Use tax-exempt in taxable accounts and some short term bonds if you're very worried about interest rates.

I'd try to keep it under 5 investments since if you're doing more, you might as well look into opening up a bunch of CDs and high interest savings. Varying the titling allows more than the 250k at each institution.

It all depends on how long you plan on sitting on this cash. I'd probably be itching to spend some.
I already have a lot of money invested in the market so my portfolio is up substantially today. I will definitely look into short term bonds as well. I'm in no rush to deploy the cash. Just looking to slowly put it to work.

TheodoreMonit
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Re: Best Place to Park Over $1m in Cash

Post by TheodoreMonit » Mon Apr 24, 2017 10:35 am

Fclevz wrote:
TheodoreMonit wrote:I'm not interested in having a bunch of online bank accounts maxed out at $250k each
If you already have a Fidelity account and are primarily worried about FDIC insurance, their cash management account is actually FDIC insured up to $1.25 million, as they automatically sweep your cash into five different banks.
I had no idea. That's really great. I assume it is truly automatic and I don't need to ask them to turn on a feature for this but might call just to be safe.

chicagoan23
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Re: Best Place to Park Over $1m in Cash

Post by chicagoan23 » Mon Apr 24, 2017 10:42 am

I'm looking for something with same day liquidity with the aim to maintain a $1 NAV while offering a decent....yield.
I doubt you would need same-day liquidity for $5 million, so I would just keep $250k in a savings account somewhere and then invest the rest in a short term bond ETF that can be traded during the day and you can settle your trade and take your cash out within a week or so.

I use the Vanguard Short-Term Bond Fund (BSV) for my "cash" holdings because I get a little yield (1.64% current 30-day yield) on short-duration mostly government bonds, and if there is ever a financial panic my guess is that you'll see a flight to safety and may get a bump in principal to offset the losses from the rest of my portfolio. When things are going well and interest rates are rising you may see a slight decline of principal, but nothing to get too worried about.

I can't imagine trying to open and close dozens of accounts just to get FDIC insurance, or opening dozens of CDs for minimal yield. Seems like too much effort for too little reward to me.

rkhusky
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Re: Best Place to Park Over $1m in Cash

Post by rkhusky » Mon Apr 24, 2017 11:00 am

$1M in Prime Money Market, $2M in Short Tax Exempt, $2M in Intermediate Tax Exempt.

ribonucleic
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Re: Best Place to Park Over $1m in Cash

Post by ribonucleic » Mon Apr 24, 2017 11:18 am

Is it a certainty that Vanguard will immediately process a seven-figure purchase order - even for a money market fund?

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Re: Best Place to Park Over $1m in Cash

Post by kolea » Mon Apr 24, 2017 11:43 am

TheodoreMonit wrote: I'm looking for something with same day liquidity with the aim to maintain a $1 NAV while offering a decent (I know it will probably max out at 0.85-0.90%) yield.
If by "same day liquidity" you mean able to cash-out without loss of principal, your goal is going to be difficult. Any debt instrument (bonds, bond fund, CD) is going to either have a withdrawal penalty or have risk that you won't recover your principal if you want to sell immediately. Even a 3-month Treasury will have some risk and that is about the shortest you can go and still get 0.8%.

I thought DCA is used in a falling market? I personally don't get it and would just invest it all now.
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Nowizard
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Re: Best Place to Park Over $1m in Cash

Post by Nowizard » Mon Apr 24, 2017 12:38 pm

Recent studies clearly state that to DCA is a losing proposition for any reason other than emotional comfort provided from that approach. I wish I had the link to a very recent study in that regard, but I do not. Perhaps, someone does and would choose to make it the topic for a new thread.

Tim

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Re: Best Place to Park Over $1m in Cash

Post by Good Listener » Mon Apr 24, 2017 12:41 pm

See PM.

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hand
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Re: Best Place to Park Over $1m in Cash

Post by hand » Mon Apr 24, 2017 2:24 pm

Parking "large" amounts of cash is not an uncommon problem and many institutions have ways to handle similar to the Fidelity solution above.

To me, FDIC or similar insurance would be critical for a short term " safe" deposit.

Bankrate had a dated article that covered some of the options (CDARS, IDC, Individually buying CDs from unrelated banks) and might be a good start for research: http://www.bankrate.com/banking/savings ... -deposits/

Alternately, ask your banker who will likely be motivated to find you solutions that meet your needs at their bank.

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CyberBob
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Re: Best Place to Park Over $1m in Cash

Post by CyberBob » Mon Apr 24, 2017 9:47 pm

ribonucleic wrote:Is it a certainty that Vanguard will immediately process a seven-figure purchase order - even for a money market fund?
Vanguard has a list of large transaction limits by fund. For some funds it's as low as $100k, but for money markets it is $50 mil.

https://advisors.vanguard.com/VGApp/iip ... ments/ltqt

Dontridetheindexdown
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Re: Best Place to Park Over $1m in Cash

Post by Dontridetheindexdown » Mon Apr 24, 2017 9:50 pm

VBIRX - Vanguard Short-Term Bond Index Fund Admiral Shares

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