What are you doing with cash?

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Hoggrad
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Joined: Mon Dec 25, 2017 9:19 pm

What are you doing with cash?

Post by Hoggrad » Sun Jun 03, 2018 4:05 pm

After reading the debate on whether having a savings account is worth it or not, I am left with a few questions. I am not looking to debate whether looking to grow my cash is smart or not, so just throwing that out there as it appears a few in that thread wanted to do.

I am younger in my investing life and looking to be aggressive. I am looking for any opportunity to grow my wealth I can, so if putting my cash in a prime MM at 1.9% is an option over a savings account at 0.45-1%, I am taking the 1.9%.

So my question, or topic of this post, what you are doing with your liquid cash? This is not my 401k money or anything, this is my liquid cash on hand, emergency fund, whatever else you want to call it.

-Some guys mentioned cash bonuses for opening accounts and leaving minimums in there for the allotted amount of time, anyone have a list of these or something? I have missed out on these and don't mind doing the leg work and clicks to get it done.
-Some mentioned a prime money market account or something, vanguard is around 1.93 right now I think.
-Someone mentioned a taxable brokerage account and using a VASGX or something.

So what is everyone doing with their cash? I don't need the feeling to be able to get it today from an ATM, I just need to be able to get to it in a few business days shall an emergency require it.

Thanks for the inputs!

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ruralavalon
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Re: What are you doing with cash?

Post by ruralavalon » Sun Jun 03, 2018 4:16 pm

My personal choice would be Vanguard Prime Money Market Fund (VMMXX), current SEC Yield = 1.91% in a taxable account. When needed the money can be available in your checking account within 2 days.
Last edited by ruralavalon on Sun Jun 03, 2018 4:19 pm, edited 1 time in total.
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jebmke
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Re: What are you doing with cash?

Post by jebmke » Sun Jun 03, 2018 4:19 pm

I don't keep cash around until I am ready to spend it.
When you discover that you are riding a dead horse, the best strategy is to dismount.

Hoggrad
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Re: What are you doing with cash?

Post by Hoggrad » Sun Jun 03, 2018 4:21 pm

jebmke wrote:
Sun Jun 03, 2018 4:19 pm
I don't keep cash around until I am ready to spend it.
Sorry my wording was not up to par for you, but you can just replace "cash" with short term funding or whatever way you want to dress up cash I guess? Thanks for the help though

BogleMelon
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Re: What are you doing with cash?

Post by BogleMelon » Sun Jun 03, 2018 4:22 pm

ruralavalon wrote:
Sun Jun 03, 2018 4:16 pm
My personal choice would be Vanguard Prime Money Market Fund (VMMXX), current SEC Yield = 1.91% in a taxable account. When needed the money can be available in your checking account within 2 days.
+1
I moved my savings from Ally to VMMXX. I am in a low tax bracket, so municipal funds are not attractive for me.
I also have Some I bonds and planning to buy more before the end of year.

I am not pursuing bank bonus rewards anymore, I no longer want my finances to be complicated, but if you want, check this: https://www.doctorofcredit.com/
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

Hoggrad
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Re: What are you doing with cash?

Post by Hoggrad » Sun Jun 03, 2018 4:24 pm

ruralavalon wrote:
Sun Jun 03, 2018 4:16 pm
My personal choice would be Vanguard Prime Money Market Fund (VMMXX), current SEC Yield = 1.91% in a taxable account. When needed the money can be available in your checking account within 2 days.
Thats where I am putting mine currently. But curious if I am missing out on any other angles, specifically the one about bonuses being paid to accounts.

jebmke
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Re: What are you doing with cash?

Post by jebmke » Sun Jun 03, 2018 4:24 pm

Hoggrad wrote:
Sun Jun 03, 2018 4:21 pm
jebmke wrote:
Sun Jun 03, 2018 4:19 pm
I don't keep cash around until I am ready to spend it.
Sorry my wording was not up to par for you, but you can just replace "cash" with short term funding or whatever way you want to dress up cash I guess? Thanks for the help though
Everything that isn't in equity is in bonds. When I need money, I sell one or the other (unless dividends are coming in which is the same as selling equity).
When you discover that you are riding a dead horse, the best strategy is to dismount.

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cfs
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Re: What are you doing with cash?

Post by cfs » Sun Jun 03, 2018 4:32 pm

My investable money is already invested. Now to cash. I have cash in checking account to pay all our bills, all of them except car insurance in auto pay mode, cash in savings account for my local use, cash in money market funds, plus, my wallet is always full of dead presidents. Your money, your portfolio, your decision. Good luck y gracias por leer / cfs
~ Member of the Active Retired Force since 2014 ~

dbr
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Re: What are you doing with cash?

Post by dbr » Sun Jun 03, 2018 4:46 pm

Cash on hand and an actual emergency fund are two different things. I am an older, retired investor and don't have an emergency fund as such because we withdraw from investments anyway, including RMDs from tax deferred accounts. Like another poster there is always cash on hand sloshing around in settlement accounts, money market funds, checking accounts, available credit on credit cards, etc. I suppose we average about 1%-2% of assets with great variability in cash accounts.

The issue of where to keep what might amount to 10% or more of a young investors assets in an emergency fund is more tricky and I suppose would range across savings accounts, CDs, short bonds, etc. The issue seems more problematic in times of low interest rates.

rbaldini
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Re: What are you doing with cash?

Post by rbaldini » Sun Jun 03, 2018 5:02 pm

About $10k in checking for monthly things and an occasional large expense. Mostly paying off credit card expenses. Otherwise it's all invested. Can sell stocks / bonds if I ever need more.

Hoggrad
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Re: What are you doing with cash?

Post by Hoggrad » Sun Jun 03, 2018 5:04 pm

rbaldini wrote:
Sun Jun 03, 2018 5:02 pm
About $10k in checking for monthly things and an occasional large expense. Mostly paying off credit card expenses. Otherwise it's all invested. Can sell stocks / bonds if I ever need more.
That's where I am at currently after just putting a large pile of cash in the vanguard prime money market. I am not comfortable with short term bond and T bills to play around with that myself. Just seeing if anyone has any better ideas and I will also research how to play in the bonds myself if that appears more attractive than the prime money market fund at Vanguard right now.

rbaldini
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Re: What are you doing with cash?

Post by rbaldini » Sun Jun 03, 2018 5:09 pm

Hoggrad wrote:
Sun Jun 03, 2018 5:04 pm
rbaldini wrote:
Sun Jun 03, 2018 5:02 pm
About $10k in checking for monthly things and an occasional large expense. Mostly paying off credit card expenses. Otherwise it's all invested. Can sell stocks / bonds if I ever need more.
That's where I am at currently after just putting a large pile of cash in the vanguard prime money market. I am not comfortable with short term bond and T bills to play around with that myself. Just seeing if anyone has any better ideas and I will also research how to play in the bonds myself if that appears more attractive than the prime money market fund at Vanguard right now.
Let me clarify. I've got about $10k in checking. Everything else is either in stocks, bonds, or my house. I don't do money market or anything like that. I don't "play around" with bonds, if you mean day trading or trying to beat the market etc. I land my investments in a mix of stock and bond index funds, and leave them there. The usual boglehead thing.

BogleDan
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Re: What are you doing with cash?

Post by BogleDan » Sun Jun 03, 2018 6:08 pm

ruralavalon wrote:
Sun Jun 03, 2018 4:16 pm
My personal choice would be Vanguard Prime Money Market Fund (VMMXX), current SEC Yield = 1.91% in a taxable account. When needed the money can be available in your checking account within 2 days.
Can you talk a bit more about the Prime Money Market Fund as an option? I don't quite understand how SEC Yields factor directly into returns. For instance, you mention a 1.91% yield, but VMMXX has only returned 1.2% in the last year. Furthermore, on a 3 year basis, it has an annualized return of only 0.64%. And on a 5 year basis, an annualized return of only 0.39%.

Am I correct in assuming that these low returns are directly correlated to the low-interest rate environment we've been in for the last decade?

My situation: I keep six-figures at all times in an Ally Savings account (currently 1.5%) due to needing money on hand for estimated taxes. I am very open to other options for that money (including the Prime Money Market, a municipal bond fund like VTEBX, or a municipal money market fund like VCTXX), but at first glance the low returns don't seem to compete with the FDIC-insured 1.5% at Ally, even including possible tax advantages of the muni's.

Any advice would be appreciated!

megabad
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Re: What are you doing with cash?

Post by megabad » Sun Jun 03, 2018 6:12 pm

Hoggrad wrote:
Sun Jun 03, 2018 4:05 pm
So my question, or topic of this post, what you are doing with your liquid cash?
FDIC insured high yield savings, CD ladder, I-bonds.

If you are a fanatic about bonuses (I am not) there are some decent sites that seem to track them. See topic viewtopic.php?t=236115

manedark
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Re: What are you doing with cash?

Post by manedark » Sun Jun 03, 2018 7:03 pm

Hoggrad wrote:
Sun Jun 03, 2018 4:05 pm
After reading the debate on whether having a savings account is worth it or not, I am left with a few questions. I am not looking to debate whether looking to grow my cash is smart or not, so just throwing that out there as it appears a few in that thread wanted to do.

I am younger in my investing life and looking to be aggressive. I am looking for any opportunity to grow my wealth I can, so if putting my cash in a prime MM at 1.9% is an option over a savings account at 0.45-1%, I am taking the 1.9%.

So my question, or topic of this post, what you are doing with your liquid cash? This is not my 401k money or anything, this is my liquid cash on hand, emergency fund, whatever else you want to call it.

-Some guys mentioned cash bonuses for opening accounts and leaving minimums in there for the allotted amount of time, anyone have a list of these or something? I have missed out on these and don't mind doing the leg work and clicks to get it done.
-Some mentioned a prime money market account or something, vanguard is around 1.93 right now I think.
-Someone mentioned a taxable brokerage account and using a VASGX or something.

So what is everyone doing with their cash? I don't need the feeling to be able to get it today from an ATM, I just need to be able to get to it in a few business days shall an emergency require it.

Thanks for the inputs!
I am buying 6 month T-bills at 2.07% indicative yield for abkut 30K cash that I dont need till the end of the year. I will avoid 9.3% CA tax with this option as compared to a bank CD.

Nate79
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Re: What are you doing with cash?

Post by Nate79 » Sun Jun 03, 2018 7:14 pm

jebmke wrote:
Sun Jun 03, 2018 4:24 pm
Hoggrad wrote:
Sun Jun 03, 2018 4:21 pm
jebmke wrote:
Sun Jun 03, 2018 4:19 pm
I don't keep cash around until I am ready to spend it.
Sorry my wording was not up to par for you, but you can just replace "cash" with short term funding or whatever way you want to dress up cash I guess? Thanks for the help though
Everything that isn't in equity is in bonds. When I need money, I sell one or the other (unless dividends are coming in which is the same as selling equity).
That seems a little strange. You pay every single bill by selling bonds and have zero cash on hand?

Hoggrad
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Re: What are you doing with cash?

Post by Hoggrad » Sun Jun 03, 2018 8:01 pm

manedark wrote:
Sun Jun 03, 2018 7:03 pm
Hoggrad wrote:
Sun Jun 03, 2018 4:05 pm
After reading the debate on whether having a savings account is worth it or not, I am left with a few questions. I am not looking to debate whether looking to grow my cash is smart or not, so just throwing that out there as it appears a few in that thread wanted to do.

I am younger in my investing life and looking to be aggressive. I am looking for any opportunity to grow my wealth I can, so if putting my cash in a prime MM at 1.9% is an option over a savings account at 0.45-1%, I am taking the 1.9%.

So my question, or topic of this post, what you are doing with your liquid cash? This is not my 401k money or anything, this is my liquid cash on hand, emergency fund, whatever else you want to call it.

-Some guys mentioned cash bonuses for opening accounts and leaving minimums in there for the allotted amount of time, anyone have a list of these or something? I have missed out on these and don't mind doing the leg work and clicks to get it done.
-Some mentioned a prime money market account or something, vanguard is around 1.93 right now I think.
-Someone mentioned a taxable brokerage account and using a VASGX or something.

So what is everyone doing with their cash? I don't need the feeling to be able to get it today from an ATM, I just need to be able to get to it in a few business days shall an emergency require it.

Thanks for the inputs!
I am buying 6 month T-bills at 2.07% indicative yield for abkut 30K cash that I dont need till the end of the year. I will avoid 9.3% CA tax with this option as compared to a bank CD.

Mind sharing a little more info? This is exactly the kind of option I am looking at. I am similar to like the other guy, a have a lot of cash on hand for estimated taxes, so a little better interest on that is always a plus as well.

rbaldini
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Re: What are you doing with cash?

Post by rbaldini » Sun Jun 03, 2018 8:12 pm

If you are young and looking to be aggressive, why not use that cash to buy more stock or bond index funds? These should provide greater long term return than a cash-like asset, with more risk. In other words, why hold onto much cash at all, beyond your immediate needs? Open up an account and invest.

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Cycle
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Re: What are you doing with cash?

Post by Cycle » Sun Jun 03, 2018 8:13 pm

Powerplus checking 2% from BCU credit union, up to 25k. If one has atm fees, they get subtracted from your 2% with this deal, but we rarely do bc there are a lot of free atms.

PFInterest
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Re: What are you doing with cash?

Post by PFInterest » Sun Jun 03, 2018 8:14 pm

Hoggrad wrote:
Sun Jun 03, 2018 4:05 pm
After reading the debate on whether having a savings account is worth it or not, I am left with a few questions. I am not looking to debate whether looking to grow my cash is smart or not, so just throwing that out there as it appears a few in that thread wanted to do.

I am younger in my investing life and looking to be aggressive. I am looking for any opportunity to grow my wealth I can, so if putting my cash in a prime MM at 1.9% is an option over a savings account at 0.45-1%, I am taking the 1.9%.

So my question, or topic of this post, what you are doing with your liquid cash? This is not my 401k money or anything, this is my liquid cash on hand, emergency fund, whatever else you want to call it.

-Some guys mentioned cash bonuses for opening accounts and leaving minimums in there for the allotted amount of time, anyone have a list of these or something? I have missed out on these and don't mind doing the leg work and clicks to get it done.
-Some mentioned a prime money market account or something, vanguard is around 1.93 right now I think.
-Someone mentioned a taxable brokerage account and using a VASGX or something.

So what is everyone doing with their cash? I don't need the feeling to be able to get it today from an ATM, I just need to be able to get to it in a few business days shall an emergency require it.

Thanks for the inputs!
saving it.
we are moving soon across the country so the initial rent check might be 10K (1st, last, security deposit), plus 5-10K to move.
so saving it.

NoHeat
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Re: What are you doing with cash?

Post by NoHeat » Sun Jun 03, 2018 8:28 pm

MINT, 2.37% SEC yield, 0.5 yr duration, taxable
BIL, 1.58%, 0.1 yr, T bills so free of state tax

http://www.pimcoetfs.com/Funds/Pages/PI ... yFund.aspx

https://us.spdrs.com/en/etf/spdr-bloomb ... ll-etf-BIL

For comparison, Vanguard Prime MM is 1.91% SEC yield, duration is irrelevant so long as the manager won’t break a buck, and it’s taxable

Hoggrad
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Re: What are you doing with cash?

Post by Hoggrad » Sun Jun 03, 2018 10:02 pm

rbaldini wrote:
Sun Jun 03, 2018 8:12 pm
If you are young and looking to be aggressive, why not use that cash to buy more stock or bond index funds? These should provide greater long term return than a cash-like asset, with more risk. In other words, why hold onto much cash at all, beyond your immediate needs? Open up an account and invest.
Estimated taxes is one. I have a plan set forth for the long term. However once I started a plan about 6-8 months ago, I started to really follow a budget better and saving better, along with my wife starting a low 6 figure job, we just are having a lot of cash coming in that I am not letting go into anything long term. Our AGI in 2018 is likely to be 3-4x 2017. So having it in short term or accessible accounts is important. But not wanting to park it in my savings account that pays 0.45% right now.

jebmke
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Re: What are you doing with cash?

Post by jebmke » Sun Jun 03, 2018 10:09 pm

Hoggrad wrote:
Sun Jun 03, 2018 8:01 pm
Mind sharing a little more info?
You can buy Treasury instruments through a brokerage - either in the secondary market or at auction. Personally, it doesn't make sense to buy individual bills/bonds until the amount gets up there -- maybe $500K -- the cost of a fund is pretty low and doesn't require any work to get in and out if you need the money.
When you discover that you are riding a dead horse, the best strategy is to dismount.

radiowave
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Re: What are you doing with cash?

Post by radiowave » Sun Jun 03, 2018 10:22 pm

Our first tier is approximately $4-5k in checking to cover monthly cash flow and cc charges. Second tier is a mixture of high yield savings, CDs, and short term T-Bills. Third tier is Total Stock MF in taxable. We don't have a separate "emergency fund".
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

k4carbon
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Re: What are you doing with cash?

Post by k4carbon » Sun Jun 03, 2018 11:17 pm

I put $100K into checking account in Jan for the year (no interest). I have $100K in 2% CD ladder (renewing at higher rates as they mature). I am retired and sold my business 4 years ago (took home $3.5M after tax). I realize not for everyone but I am angel investor - I found local startup company (That I investigated and see a great future) that pays me 6% interest on funds I have loaned them ($140K). No earned income and no SS yet (age 67, wife 66) and no tax on capital gains due to low tax bracket. Have $1.3M paid-off house and $1.5M in 401k and brokerage equity/bond investments. Have pension of $1100/month from military. Four years ago I bought $25K of gold and mainly silver coins just because. Zero debt.

manedark
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Re: What are you doing with cash?

Post by manedark » Mon Jun 04, 2018 12:23 am

Hoggrad wrote:
Sun Jun 03, 2018 8:01 pm
manedark wrote:
Sun Jun 03, 2018 7:03 pm
Hoggrad wrote:
Sun Jun 03, 2018 4:05 pm
After reading the debate on whether having a savings account is worth it or not, I am left with a few questions. I am not looking to debate whether looking to grow my cash is smart or not, so just throwing that out there as it appears a few in that thread wanted to do.

I am younger in my investing life and looking to be aggressive. I am looking for any opportunity to grow my wealth I can, so if putting my cash in a prime MM at 1.9% is an option over a savings account at 0.45-1%, I am taking the 1.9%.

So my question, or topic of this post, what you are doing with your liquid cash? This is not my 401k money or anything, this is my liquid cash on hand, emergency fund, whatever else you want to call it.

-Some guys mentioned cash bonuses for opening accounts and leaving minimums in there for the allotted amount of time, anyone have a list of these or something? I have missed out on these and don't mind doing the leg work and clicks to get it done.
-Some mentioned a prime money market account or something, vanguard is around 1.93 right now I think.
-Someone mentioned a taxable brokerage account and using a VASGX or something.

So what is everyone doing with their cash? I don't need the feeling to be able to get it today from an ATM, I just need to be able to get to it in a few business days shall an emergency require it.

Thanks for the inputs!
I am buying 6 month T-bills at 2.07% indicative yield for abkut 30K cash that I dont need till the end of the year. I will avoid 9.3% CA tax with this option as compared to a bank CD.

Mind sharing a little more info? This is exactly the kind of option I am looking at. I am similar to like the other guy, a have a lot of cash on hand for estimated taxes, so a little better interest on that is always a plus as well.
You can buy the T-bill through Vanguard brokerage account with the Auction option that is open on 4th June and will mature 6 months later in December - in time for taxes. Actually part of my investment is estimated taxes as well. Well it actually changes my return by only a small amount i.e. on 30K I gain 93$ more compared to a CD, but money is money.

boglerdude
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Re: What are you doing with cash?

Post by boglerdude » Mon Jun 04, 2018 1:07 am

ibonds
Consumers CU high yield checking
Vanguard GNMA

Ill take a look at MINT and Vanguard ultra-short
https://investor.vanguard.com/mutual-fu ... view/vubfx

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Leif
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Re: What are you doing with cash?

Post by Leif » Mon Jun 04, 2018 1:14 am

I'm also using Vanguard Prime MM. I recently was using a muni MM, but their tax equivalent yield no longer made sense for me.

Chase often has promotions for savings accounts and credit cards. If you have the time and interest you might earning a couple of hundred $ over about 6 months. Check their website and see if they have any offers. The problem is to pick up the bonus you need to keep the money with them for a while. Sometimes they require payroll direct deposit.

Momus
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Re: What are you doing with cash?

Post by Momus » Mon Jun 04, 2018 4:45 am

When you guys use Vanguard Money Market, do you write checks and use this account as a regular bank account? Isn't this a bit more dangerous because the routing/account number is more exposed and mutual fund money market doesn't have a bank protection? Enlighten me.

Dandy
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Re: What are you doing with cash?

Post by Dandy » Mon Jun 04, 2018 6:02 am

I'm retired age 70 and have a nice nest egg invested conservatively. I roughly follow Dr. Bernstein's idea of having 20-25 years of "safe" assets. For me that is CDs, Savings Accounts, Money Market funds/deposit accounts, some legacy EE bonds. as well as short term bond funds. So fixed income is about 1/3 Cash like, 1/3 short term bond funds and 1/3 intermediate bond funds.

The 1/3 cash like basically is no loss of principal so it participates in rising interest rates. That and the equities have offset the minor declines in short and intermediate bond funds. This suits my asset preservation goal. In the accumulation stage I had a very large allocation to the Stable Value Fund which had a much higher interest rate (ranging from 11% to 5%) than current Stable Value Funds offer. So, I have been a cash-like fan for most of my investment life -- and it has served me well. Not saying that would be the case if I was currently in the accumulation stage.

Finally, my equity allocation is very close to the top of my target range. When equities decline I will use cash like assets to rebalance. I will also shift some cash like assets to short term or intermediate term funds to keep my fixed income roughly balanced.

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midareff
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Re: What are you doing with cash?

Post by midareff » Mon Jun 04, 2018 8:23 am

I accumulate cash to spend on travel. As it accumulates it is stored in an Ally Bank Savings account. Since we have been cruising multiple times annually I have Ally move it the day before due to a separate account so as to use Vikings 3.3% discount for cash transfer. Cash generally runs about 3% of total keeping in mind we self escrow property tax, car and condo insurance and EFTPS IRS Quarterly payments.

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Leif
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Re: What are you doing with cash?

Post by Leif » Mon Jun 04, 2018 8:30 am

Momus wrote:
Mon Jun 04, 2018 4:45 am
When you guys use Vanguard Money Market, do you write checks and use this account as a regular bank account? Isn't this a bit more dangerous because the routing/account number is more exposed and mutual fund money market doesn't have a bank protection? Enlighten me.
I think you have a good and often overlooked point. I keep my Prime account as a staging area. My checking is refilled as necessary. A bit more work, but I feel more comfortable with this setup. Sort of like a firewall to make an structure/IT comparison.

dbr
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Re: What are you doing with cash?

Post by dbr » Mon Jun 04, 2018 8:38 am

Leif wrote:
Mon Jun 04, 2018 8:30 am
Momus wrote:
Mon Jun 04, 2018 4:45 am
When you guys use Vanguard Money Market, do you write checks and use this account as a regular bank account? Isn't this a bit more dangerous because the routing/account number is more exposed and mutual fund money market doesn't have a bank protection? Enlighten me.
I think you have a good and often overlooked point. I keep my Prime account as a staging area. My checking is refilled as necessary. A bit more work, but I feel more comfortable with this setup. Sort of like a firewall to make an structure/IT comparison.
As a practical matter my local bank checking account is the "slush" box for all the coming and going of money including direct deposits, bill-pay, transfer of money in and out. I have checks for a couple of money funds but have never used them. The other part of the "cash" system is credit cards, which actually absorb the larger part of monthly spending and are paid off monthly from checking. All credit cards have some kind of awards offered.

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aj76er
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Re: What are you doing with cash?

Post by aj76er » Mon Jun 04, 2018 9:53 am

Leif wrote:
Mon Jun 04, 2018 8:30 am
Momus wrote:
Mon Jun 04, 2018 4:45 am
When you guys use Vanguard Money Market, do you write checks and use this account as a regular bank account? Isn't this a bit more dangerous because the routing/account number is more exposed and mutual fund money market doesn't have a bank protection? Enlighten me.
I think you have a good and often overlooked point. I keep my Prime account as a staging area. My checking is refilled as necessary. A bit more work, but I feel more comfortable with this setup. Sort of like a firewall to make an structure/IT comparison.
+1. I think of the same (firewall) analogy.
If you use Fidelity or Schwab, you can have a separate checking account for actually paying bills. Then your brokerage money market just acts like a savings account.
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

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ruralavalon
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Re: What are you doing with cash?

Post by ruralavalon » Mon Jun 04, 2018 10:13 am

Welcome to the forum :) .

BogleDan wrote:
Sun Jun 03, 2018 6:08 pm
ruralavalon wrote:
Sun Jun 03, 2018 4:16 pm
My personal choice would be Vanguard Prime Money Market Fund (VMMXX), current SEC Yield = 1.91% in a taxable account. When needed the money can be available in your checking account within 2 days.
Can you talk a bit more about the Prime Money Market Fund as an option? I don't quite understand how SEC Yields factor directly into returns. For instance, you mention a 1.91% yield, but VMMXX has only returned 1.2% in the last year. Furthermore, on a 3 year basis, it has an annualized return of only 0.64%. And on a 5 year basis, an annualized return of only 0.39%.
"The SEC yield for a money market fund is calculated by annualizing its daily income distributions for the previous 7 days". (See the linked definitions on the Vanguard page for the money market fund.) Also "Seven day yield is a measure of the annualized yield for a money market mutual fund. It is usually calculated based on the fund’s average seven day distribution. The seven day yield may also be referred to as the seven day annualized return." Investopedia, "Seven Day Yield". The Investopedia entry also explains the calculation and uses of this figure.

The SEC Yield for a money market fund changes frequently, and for Vanguard Prime Money Market Fund (VMMXX) has risen dramatically over the last few years. I expect that it will continue to rise with the Federal Reserve rate changes projected.

Note that there is a different formula for calculating the SEC Yield of a bond fund.

I think that the SEC Yield of a money market fund is the best metric to use to compare with interest rates of bank or S&L savings accounts or CDs.


BogleDan wrote:
Sun Jun 03, 2018 6:08 pm
Am I correct in assuming that these low returns are directly correlated to the low-interest rate environment we've been in for the last decade?
Yes.


BogleDan wrote:
Sun Jun 03, 2018 6:08 pm
My situation: I keep six-figures at all times in an Ally Savings account (currently 1.5%) due to needing money on hand for estimated taxes. I am very open to other options for that money (including the Prime Money Market, a municipal bond fund like VTEBX, or a municipal money market fund like VCTXX), but at first glance the low returns don't seem to compete with the FDIC-insured 1.5% at Ally, even including possible tax advantages of the muni's.

Any advice would be appreciated!
If you need six figures to pay quarterly income tax estimates, then I would guess that your tax bracket and marginal tax rate may be high enough to warrant using a tax-exempt fund of some kind.

Vanguard California Municipal Money Market Fund (VCTXX), current SEC Yield = 1.01%. Not knowing your marginal tax rate I can't say if that is a better net return than the Ally account.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Hoggrad
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Re: What are you doing with cash?

Post by Hoggrad » Mon Jun 04, 2018 11:12 am

Momus wrote:
Mon Jun 04, 2018 4:45 am
When you guys use Vanguard Money Market, do you write checks and use this account as a regular bank account? Isn't this a bit more dangerous because the routing/account number is more exposed and mutual fund money market doesn't have a bank protection? Enlighten me.
Before making this post and setting up the Vanguard money market, I held two accounts at my local bank. One is a checking and one was a savings. I kept a months worth of expense in the checking, or so, and it's where all my income is deposited and all bills are paid for. I also have/had a savings account that was paying 0.45%, which is where I kept a "stash" of cash. I have been trying to perfect a system for that savings account as I own my own business and my income has been growing each year the last 5-6 years. I saved the minimum needed to pay my taxes (hopefully, did have to come up with a little more once or twice) and kept it there in that savings and then everything else went to debt. Now as I am trying to pay of my wife's student loans we keep creeping up the percentage in which we save month from our gross income, I am trying to get to 55% savings by end of the year. That 55% is used to pay any taxes, 401k, HSA and so forth. My point of this thread was to find a better way to save this cash, keep it liquid, and make more than 0.45% from my local bank.

**Keep in my mind, I am still learning all of this as well. Just passing along what I have been doing and hopefully it's not clearly wrong. ha.

H-Town
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Re: What are you doing with cash?

Post by H-Town » Mon Jun 04, 2018 11:21 am

Hoggrad wrote:
Sun Jun 03, 2018 4:05 pm
I am younger in my investing life and looking to be aggressive. I am looking for any opportunity to grow my wealth I can, so if putting my cash in a prime MM at 1.9% is an option over a savings account at 0.45-1%, I am taking the 1.9%.
So if you want to be aggressive, 1.9% prime MM is not cutting it, right? Why don't you floor it and go with 100% equity? Better yet, leverage yourself 120-140% and go all-in with equity can give you another 3-4% return if it's like last year.

What do I do with cash? I set aside just enough to pay bill when it's due.

changingtimes
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Re: What are you doing with cash?

Post by changingtimes » Mon Jun 04, 2018 11:24 am

dbr wrote:
Mon Jun 04, 2018 8:38 am
As a practical matter my local bank checking account is the "slush" box for all the coming and going of money including direct deposits, bill-pay, transfer of money in and out. I have checks for a couple of money funds but have never used them. The other part of the "cash" system is credit cards, which actually absorb the larger part of monthly spending and are paid off monthly from checking. All credit cards have some kind of awards offered.
+1. Though I am in the process of moving a big chunk of cash that was at both Ally and AmEx Savings to the Vanguard Prime MM. Also have some in a one-year 2% CD at Ally.

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ruralavalon
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Re: What are you doing with cash?

Post by ruralavalon » Mon Jun 04, 2018 11:26 am

thangngo wrote:
Mon Jun 04, 2018 11:21 am
Hoggrad wrote:
Sun Jun 03, 2018 4:05 pm
I am younger in my investing life and looking to be aggressive. I am looking for any opportunity to grow my wealth I can, so if putting my cash in a prime MM at 1.9% is an option over a savings account at 0.45-1%, I am taking the 1.9%.
So if you want to be aggressive, 1.9% prime MM is not cutting it, right? Why don't you floor it and go with 100% equity? Better yet, leverage yourself 120-140% and go all-in with equity can give you another 3-4% return if it's like last year.

What do I do with cash? I set aside just enough to pay bill when it's due.
Aggressive doesn't require 100% equities, or leverage, or mean taking as much risk as possible.

Anyway the original question is "what are you doing with your liquid cash?" In other words, what vehicle to use for cash if you want to have some cash available for some reason.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Gooch
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Re: What are you doing with cash?

Post by Gooch » Mon Jun 04, 2018 1:07 pm

Purepoint Financial online savings account 1.9%

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retiredbuthappy
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Re: What are you doing with cash?

Post by retiredbuthappy » Mon Jun 04, 2018 3:25 pm

Thank you guys. This has been a very helpful thread.
Have just moved a chunk from Capitalone to VG prime mm and also learned that for Admiral shares the minimum here is $5,000,000. Did not go there :(
RbH

CascadiaSoonish
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Re: What are you doing with cash?

Post by CascadiaSoonish » Mon Jun 04, 2018 3:31 pm

Have a significant chunk sitting in a Capital One 360 Money Market account at 1.6%. I had changed up our S-Corp business billing last year resulting in a larger than expected tax refund from overpayment on estimateds. But I'm likely to need that money in April of next year for taxes. If I don't need it at that point (I'll try to pay any taxes due out of 2019 cashflow) I'll shift the cash into investments.

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midareff
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Re: What are you doing with cash?

Post by midareff » Mon Jun 04, 2018 3:59 pm

What are you doing with cash?

Spending it.

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Leif
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Re: What are you doing with cash?

Post by Leif » Mon Jun 04, 2018 4:55 pm

midareff wrote:
Mon Jun 04, 2018 3:59 pm
What are you doing with cash?

Spending it.
Yes, that is the American way. It's just not the Boglehead way.

bluerafters
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Re: What are you doing with cash?

Post by bluerafters » Mon Jun 04, 2018 5:07 pm

ruralavalon wrote:
Sun Jun 03, 2018 4:16 pm
My personal choice would be Vanguard Prime Money Market Fund (VMMXX), current SEC Yield = 1.91% in a taxable account. When needed the money can be available in your checking account within 2 days.
That's not FDIC insured, correct?

BogleDan
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Re: What are you doing with cash?

Post by BogleDan » Mon Jun 04, 2018 5:07 pm

ruralavalon wrote:
Mon Jun 04, 2018 10:13 am
BogleDan wrote:
Sun Jun 03, 2018 6:08 pm
My situation: I keep six-figures at all times in an Ally Savings account (currently 1.5%) due to needing money on hand for estimated taxes. I am very open to other options for that money (including the Prime Money Market, a municipal bond fund like VTEBX, or a municipal money market fund like VCTXX), but at first glance the low returns don't seem to compete with the FDIC-insured 1.5% at Ally, even including possible tax advantages of the muni's.

Any advice would be appreciated!
If you need six figures to pay quarterly income tax estimates, then I would guess that your tax bracket and marginal tax rate may be high enough to warrant using a tax-exempt fund of some kind.

Vanguard California Municipal Money Market Fund (VCTXX), current SEC Yield = 1.01%. Not knowing your marginal tax rate I can't say if that is a better net return than the Ally account.
Rural, thanks very much for the information and advice (and the welcome!).
Upon further research, it does appear that VCTXX might be competitive compared to a high-yield savings account for my situation. I will be in the 37% tax bracket for 2018 plus California state taxes. My effective federal rate last year was 30% and my effective california rate was 5.5%. I expect both to rise this year due to the new tax law's additional "blue state taxes". Perhaps I will face a 40% total effective rate.

Therefore, if I'm doing my math right, VCTXX would yield me something like (0.0101/0.60) = 1.68% for the year.

So it's at least in the territory of the best high yield savings accounts at the moment.

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Re: What are you doing with cash?

Post by Hoggrad » Mon Jun 04, 2018 5:30 pm

bluerafters wrote:
Mon Jun 04, 2018 5:07 pm
ruralavalon wrote:
Sun Jun 03, 2018 4:16 pm
My personal choice would be Vanguard Prime Money Market Fund (VMMXX), current SEC Yield = 1.91% in a taxable account. When needed the money can be available in your checking account within 2 days.
That's not FDIC insured, correct?
VMMXX is not FDIC insured, correct.

Hulu
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Re: What are you doing with cash?

Post by Hulu » Mon Jun 04, 2018 5:35 pm

Ally and CIT bank no penalty CDs for me. I'm primarily in real estate so like having cash for purchases. Avoids the hassle, risk and cost of refi's. Though the money market idea is interesting.

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Re: What are you doing with cash?

Post by H-Town » Mon Jun 04, 2018 6:12 pm

Leif wrote:
Mon Jun 04, 2018 4:55 pm
midareff wrote:
Mon Jun 04, 2018 3:59 pm
What are you doing with cash?

Spending it.
Yes, that is the American way. It's just not the Boglehead way.
I'm pretty sure the majority of bogleheads spend at least 33% of the gross income during their working years.

What do we make money for? Spend it, amiright?

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ruralavalon
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Re: What are you doing with cash?

Post by ruralavalon » Mon Jun 04, 2018 8:19 pm

BogleDan wrote:
Mon Jun 04, 2018 5:07 pm
ruralavalon wrote:
Mon Jun 04, 2018 10:13 am
BogleDan wrote:
Sun Jun 03, 2018 6:08 pm
My situation: I keep six-figures at all times in an Ally Savings account (currently 1.5%) due to needing money on hand for estimated taxes. I am very open to other options for that money (including the Prime Money Market, a municipal bond fund like VTEBX, or a municipal money market fund like VCTXX), but at first glance the low returns don't seem to compete with the FDIC-insured 1.5% at Ally, even including possible tax advantages of the muni's.

Any advice would be appreciated!
If you need six figures to pay quarterly income tax estimates, then I would guess that your tax bracket and marginal tax rate may be high enough to warrant using a tax-exempt fund of some kind.

Vanguard California Municipal Money Market Fund (VCTXX), current SEC Yield = 1.01%. Not knowing your marginal tax rate I can't say if that is a better net return than the Ally account.
Rural, thanks very much for the information and advice (and the welcome!).
Upon further research, it does appear that VCTXX might be competitive compared to a high-yield savings account for my situation. I will be in the 37% tax bracket for 2018 plus California state taxes. My effective federal rate last year was 30% and my effective california rate was 5.5%. I expect both to rise this year due to the new tax law's additional "blue state taxes". Perhaps I will face a 40% total effective rate.

Therefore, if I'm doing my math right, VCTXX would yield me something like (0.0101/0.60) = 1.68% for the year.

So it's at least in the territory of the best high yield savings accounts at the moment.
My calculation would be Ally 1.50% x .6 = 0.90% net return, so the 1.01% tax-exempt of Vanguard California Municipal Money Market Fund (VCTXX) would be a little better but in the same general ball park.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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