"Cash" alternates: Short/Med Term Treasuries? Or?

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theac
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"Cash" alternates: Short/Med Term Treasuries? Or?

Post by theac »

I'm holding quite a bit of cash that is just sitting in the.03% MMkt at Schwab (beats the .01% Citibank was paying, or the .01% in Vanguard's Settlement Fund haha). I have no immediate or future planned use for it, other than just saving it.

And since I have no interest in putting anything into stock funds at this time (but that may change in the future), someone mentioned the Intermediate Term Treasury Index recently in a thread and I started considering the ETF (VGIT) at 1.30%. Or maybe even the Short Term Treasury Index ETF (VGSH) at .68%.

Either one still beats the .03% MMkt, and even the .55% at PenFed Credit Union where I had considered opening an online account, but I really don't want to add another institution to deal with. PenFed even has 15 mo CDs at 1% which I had also considered.

This is mostly taxable money, but might do the same move
for a bit of "cash" in my Vanguard ROTH Settlement Fund too.

Anyway, any ideas on that?

P.S.
I have no state taxes to deal with, only federal.

I already max-out the annual I-Bonds.

And yes, I know "inflation" is a big concern for most,
and I am aware of its existence, in varying degrees,
depending on each individual's personal needs in life, and their situation,
but I'm not making that a primary concern.
Although I did just exchange a good portion of my Total Bond Index
to the TIPS fund VAIPX in the ROTH.

There's a bit more info on my situation in this post of mine in this other thread:

viewtopic.php?p=6446683#p6446683
"We keep you alive to serve this ship. Row well...and live." Ben Hur...and The Taxman! hahaha
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JoMoney
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by JoMoney »

Have you looked at 'brokered CD's' ? Since other brokerages offer them, I'm guessing Schwab might at well.
Personally, I wouldn't want a bond fund that had a duration longer then my potential/expected need of the money. Ideally the duration would be a lot less. Medium term bond funds tend to have a lot longer maturities and duration then for the money I have in my "safe" bucket. Some people prefer longer bonds, either for liability matching way into the future, or because they hope they'll offer a better rebalancing effect when mixed with the rest of their portfolio. That's not a risk I want for my sleep well at night bucket, interest rates are horrible, but if having a small (relative to the rest of the portfolio) amount in cash gives me enough assurance to leave my stocks alone "for the long term" I'm good with that.
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by Wiggums »

How much cash are you talking about? The highest yielding CD might be the best fit for you. As the interest rates rise, the bond funds will take a hit. Personally, i’d rather have some market risk than lose money to inflation over the next 24-36 months.
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by theac »

Wiggums wrote: Thu Jan 13, 2022 6:20 am How much cash are you talking about? The highest yielding CD might be the best fit for you. As the interest rates rise, the bond funds will take a hit. Personally, i’d rather have some market risk than lose money to inflation over the next 24-36 months.
$70k at Schwab MMkt
$18k in Vanguard ROTH settlement acct
$3k in Vanguard taxable settlement acct

Between the Short term and the Intermediate term Treasury indexes,
what would be the main pros and cons:

1. If inflation goes up a lot?

2. If inflation stays where it is or goes down?

As far as rising interest rate risk,
I have no problem letting it sit untouched for either bond fund's duration
(if that's what it's called).
Same with my Total Bond fund and TIPS fund in the ROTH
"We keep you alive to serve this ship. Row well...and live." Ben Hur...and The Taxman! hahaha
aristotelian
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by aristotelian »

Why are you on cash now? Total Bond Market or Intermediate Treasury are the usual recommendations for your bond allocation, ideally in a tax deferred account. Could you buy a stock index fund and increase your bond allocation a corresponding amount?
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by Sandtrap »

theac wrote: Thu Jan 13, 2022 2:33 am I'm holding quite a bit of cash that is just sitting in the.03% MMkt at Schwab (beats the .01% Citibank was paying, or the .01% in Vanguard's Settlement Fund haha). I have no immediate or future planned use for it, other than just saving it.

And since I have no interest in putting anything into stock funds at this time (but that may change in the future), someone mentioned the Intermediate Term Treasury Index recently in a thread and I started considering the ETF (VGIT) at 1.30%. Or maybe even the Short Term Treasury Index ETF (VGSH) at .68%.

Either one still beats the .03% MMkt, and even the .55% at PenFed Credit Union where I had considered opening an online account, but I really don't want to add another institution to deal with. PenFed even has 15 mo CDs at 1% which I had also considered.

This is mostly taxable money, but might do the same move
for a bit of "cash" in my Vanguard ROTH Settlement Fund too.

Anyway, any ideas on that?

P.S.
I have no state taxes to deal with, only federal.

I already max-out the annual I-Bonds.

And yes, I know "inflation" is a big concern for most,
and I am aware of its existence, in varying degrees,
depending on each individual's personal needs in life, and their situation,
but I'm not making that a primary concern.
Although I did just exchange a good portion of my Total Bond Index
to the TIPS fund VAIPX in the ROTH.

There's a bit more info on my situation in this post of mine in this other thread:

viewtopic.php?p=6446683#p6446683
Any suggestion might seem like the best thing but only in "your context".
Thus:

What is this cash for?

IE:
Saving for a home or large purchase 1-3 years from now?
Emergency reserve fund?
Etc?

j :D
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hudson
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by hudson »

theac wrote: Thu Jan 13, 2022 7:15 am
Wiggums wrote: Thu Jan 13, 2022 6:20 am How much cash are you talking about? The highest yielding CD might be the best fit for you. As the interest rates rise, the bond funds will take a hit. Personally, i’d rather have some market risk than lose money to inflation over the next 24-36 months.
$70k at Schwab MMkt
$18k in Vanguard ROTH settlement acct
$3k in Vanguard taxable settlement acct
Schwab: 70K: I'd move to a high yield savings account or to a brokered CD
Roth 18K: SCHP...Schwab TIPS ETF
Vang 3K: High yield savings account
dbr
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by dbr »

Bond funds are bond funds and not cash alternates. That said there isn't much difference for most people to hold bond funds rather than cash.

The key question asked above is why is the money in cash now? What are you holding the money for?
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by exodusNH »

theac wrote: Thu Jan 13, 2022 2:33 am I'm holding quite a bit of cash that is just sitting in the.03% MMkt at Schwab (beats the .01% Citibank was paying, or the .01% in Vanguard's Settlement Fund haha). I have no immediate or future planned use for it, other than just saving it.

And since I have no interest in putting anything into stock funds at this time (but that may change in the future), someone mentioned the Intermediate Term Treasury Index recently in a thread and I started considering the ETF (VGIT) at 1.30%. Or maybe even the Short Term Treasury Index ETF (VGSH) at .68%.

Either one still beats the .03% MMkt, and even the .55% at PenFed Credit Union where I had considered opening an online account, but I really don't want to add another institution to deal with. PenFed even has 15 mo CDs at 1% which I had also considered.

This is mostly taxable money, but might do the same move
for a bit of "cash" in my Vanguard ROTH Settlement Fund too.

Anyway, any ideas on that?

P.S.
I have no state taxes to deal with, only federal.

I already max-out the annual I-Bonds.

And yes, I know "inflation" is a big concern for most,
and I am aware of its existence, in varying degrees,
depending on each individual's personal needs in life, and their situation,
but I'm not making that a primary concern.
Although I did just exchange a good portion of my Total Bond Index
to the TIPS fund VAIPX in the ROTH.

There's a bit more info on my situation in this post of mine in this other thread:

viewtopic.php?p=6446683#p6446683
Sounds like you are market timing.

Ignoring that for the moment, are you holding ANY stocks in the Roth? If not, you're wasting your most valuable space.

Do you have $18 K of stocks in any of your accounts? If so, you'd be better off selling $18k of stock in those accounts and rebuying it in your Roth IRA. This leaves your market position unchanged but makes better use of it.
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theac
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by theac »

exodusNH wrote: Thu Jan 13, 2022 8:27 am
theac wrote: Thu Jan 13, 2022 2:33 am I'm holding quite a bit of cash that is just sitting in the.03% MMkt at Schwab (beats the .01% Citibank was paying, or the .01% in Vanguard's Settlement Fund haha). I have no immediate or future planned use for it, other than just saving it.

And since I have no interest in putting anything into stock funds at this time (but that may change in the future), someone mentioned the Intermediate Term Treasury Index recently in a thread and I started considering the ETF (VGIT) at 1.30%. Or maybe even the Short Term Treasury Index ETF (VGSH) at .68%.

Either one still beats the .03% MMkt, and even the .55% at PenFed Credit Union where I had considered opening an online account, but I really don't want to add another institution to deal with. PenFed even has 15 mo CDs at 1% which I had also considered.

This is mostly taxable money, but might do the same move
for a bit of "cash" in my Vanguard ROTH Settlement Fund too.

Anyway, any ideas on that?

P.S.
I have no state taxes to deal with, only federal.

I already max-out the annual I-Bonds.

And yes, I know "inflation" is a big concern for most,
and I am aware of its existence, in varying degrees,
depending on each individual's personal needs in life, and their situation,
but I'm not making that a primary concern.
Although I did just exchange a good portion of my Total Bond Index
to the TIPS fund VAIPX in the ROTH.

There's a bit more info on my situation in this post of mine in this other thread:

viewtopic.php?p=6446683#p6446683
Sounds like you are market timing.

Ignoring that for the moment, are you holding ANY stocks in the Roth? If not, you're wasting your most valuable space.

Do you have $18 K of stocks in any of your accounts? If so, you'd be better off selling $18k of stock in those accounts and rebuying it in your Roth IRA. This leaves your market position unchanged but makes better use of it.
Market timing would imply I'm "waiting" for something, or want something.
I'm not waiting for or expecting anything.

If there happens to be a fire sale someday, who doesn't like a bargain?
And if there is no fire sale, I'm fine as I am so doesn't matter.

In the ROTH I am holding:

Two different gold funds, some silver (SLV)
Vanguard LifeStrategy Growth Fund (VASGX)
Vanguard Energy Fund Investor Shares (VGENX) small amount
Vanguard Explorer Value Fund Investor Shares (VEVFX) sm cap, small amount
Teekay LNG Partners L.P. (TGP) Nat Gas

All the equities are in the ROTH already. Have held them a long time.
I-Bonds are of course at TD
Last edited by theac on Thu Jan 13, 2022 9:30 am, edited 1 time in total.
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by theac »

aristotelian wrote: Thu Jan 13, 2022 7:56 am Why are you on cash now? Total Bond Market or Intermediate Treasury are the usual recommendations for your bond allocation, ideally in a tax deferred account. Could you buy a stock index fund and increase your bond allocation a corresponding amount?
I'm not really interested in getting into stock funds,
and are more just concerned with trying to preserve my capital as much as is reasonably possible.

If I lose a little to inflation, I can live with that.
"We keep you alive to serve this ship. Row well...and live." Ben Hur...and The Taxman! hahaha
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by theac »

Sandtrap wrote: Thu Jan 13, 2022 7:59 am
Any suggestion might seem like the best thing but only in "your context".
Thus:

What is this cash for?

IE:
Saving for a home or large purchase 1-3 years from now?
Emergency reserve fund?
Etc?

j :D
For nothing really.
There's nothing I need that I don't already have.

I guess you could say it's an emergency fund, and if no emergency comes,
then it's an inheritance.
"We keep you alive to serve this ship. Row well...and live." Ben Hur...and The Taxman! hahaha
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by pizzy »

theac wrote: Thu Jan 13, 2022 9:38 am
Sandtrap wrote: Thu Jan 13, 2022 7:59 am
Any suggestion might seem like the best thing but only in "your context".
Thus:

What is this cash for?

IE:
Saving for a home or large purchase 1-3 years from now?
Emergency reserve fund?
Etc?

j :D
For nothing really.
There's nothing I need that I don't already have.

I guess you could say it's an emergency fund, and if no emergency comes,
then it's an inheritance.
Why not invest as per your AA?

You seem to have no reason to keep it in cash.
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by 7eight9 »

Many conservative investors, myself included, favor fixed annuities these days. They pay much better than bank accounts, money market funds, CD and other low-risk fixed income investments.

There was a good thread recently titled Purchasing MYGAs (multi year guaranteed annuities) - mega thread that might be worth a look.
viewtopic.php?f=1&t=334589
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by aristotelian »

theac wrote: Thu Jan 13, 2022 9:28 am
aristotelian wrote: Thu Jan 13, 2022 7:56 am Why are you on cash now? Total Bond Market or Intermediate Treasury are the usual recommendations for your bond allocation, ideally in a tax deferred account. Could you buy a stock index fund and increase your bond allocation a corresponding amount?
I'm not really interested in getting into stock funds,
and are more just concerned with trying to preserve my capital as much as is reasonably possible.

If I lose a little to inflation, I can live with that.
Again, you could buy stocks with these funds while maintaining the same overall allocation if you sell stocks in retirement accounts. You would not be changing your overall allocation or risk. Is there a reason why these taxable funds in particular need to be in bonds?
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theac
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by theac »

pizzy wrote: Thu Jan 13, 2022 9:40 am
theac wrote: Thu Jan 13, 2022 9:38 am
Sandtrap wrote: Thu Jan 13, 2022 7:59 am
Any suggestion might seem like the best thing but only in "your context".
Thus:

What is this cash for?

IE:
Saving for a home or large purchase 1-3 years from now?
Emergency reserve fund?
Etc?

j :D
For nothing really.
There's nothing I need that I don't already have.

I guess you could say it's an emergency fund, and if no emergency comes,
then it's an inheritance.
Why not invest as per your AA?

You seem to have no reason to keep it in cash.
Uh, I've never been much of a drinker. :D (Just a little joke)

I actually have a very good reason to be in cash.
I'm not looking to own stocks, and I already have a lot of bond funds.

I'm doing fine with just my pension,
and when I take SS my disposable cash problems will then be an even bigger problem.

So if I figure out a comfortable place to put my "cash" now,
when that time comes I'll have a better handle on it.

I'm sort of leaning toward the Intermediate Term Treasury Index ETF
Last edited by theac on Thu Jan 13, 2022 10:41 am, edited 2 times in total.
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by theac »

7eight9 wrote: Thu Jan 13, 2022 9:42 am Many conservative investors, myself included, favor fixed annuities these days. They pay much better than bank accounts, money market funds, CD and other low-risk fixed income investments.

There was a good thread recently titled Purchasing MYGAs (multi year guaranteed annuities) - mega thread that might be worth a look.
viewtopic.php?f=1&t=334589
I've always heard that annuities are not a good thing (except for the salesman).

But I seem to remember they may have been talking about a certain type of annuity, so I'll have a look at that thread to see if there's anything there I might be interested in.
Thanks
"We keep you alive to serve this ship. Row well...and live." Ben Hur...and The Taxman! hahaha
exodusNH
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by exodusNH »

theac wrote: Thu Jan 13, 2022 10:35 am
7eight9 wrote: Thu Jan 13, 2022 9:42 am Many conservative investors, myself included, favor fixed annuities these days. They pay much better than bank accounts, money market funds, CD and other low-risk fixed income investments.

There was a good thread recently titled Purchasing MYGAs (multi year guaranteed annuities) - mega thread that might be worth a look.
viewtopic.php?f=1&t=334589
I've always heard that annuities are not a good thing (except for the salesman).

But I seem to remember they may have been talking about a certain type of annuity, so I'll have a look at that thread to see if there's anything there I might be interested in.
Thanks
MYGAs and SPIAs are the exceptions. What you don't want to get into is stuff like variable annuities or "fixed index" annuities. They keep coming up with different names for the latter as the current name gets tainted.

MYGAs are basically CDs.

SPIAs are basically "I give you $x", "we give you $y until you die." For the latter, they're relying on the fact that they can predict life expectancy pretty accurately as a group. The people who die sooner than expected wind up subsidizing the people who live longer.

The other ones are complex contracts, with performance tied to underlying equities with all sorts of caps and other nonsense.
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by exodusNH »

theac wrote: Thu Jan 13, 2022 9:20 am
exodusNH wrote: Thu Jan 13, 2022 8:27 am
theac wrote: Thu Jan 13, 2022 2:33 am I'm holding quite a bit of cash that is just sitting in the.03% MMkt at Schwab (beats the .01% Citibank was paying, or the .01% in Vanguard's Settlement Fund haha). I have no immediate or future planned use for it, other than just saving it.

And since I have no interest in putting anything into stock funds at this time (but that may change in the future), someone mentioned the Intermediate Term Treasury Index recently in a thread and I started considering the ETF (VGIT) at 1.30%. Or maybe even the Short Term Treasury Index ETF (VGSH) at .68%.

Either one still beats the .03% MMkt, and even the .55% at PenFed Credit Union where I had considered opening an online account, but I really don't want to add another institution to deal with. PenFed even has 15 mo CDs at 1% which I had also considered.

This is mostly taxable money, but might do the same move
for a bit of "cash" in my Vanguard ROTH Settlement Fund too.

Anyway, any ideas on that?

P.S.
I have no state taxes to deal with, only federal.

I already max-out the annual I-Bonds.

And yes, I know "inflation" is a big concern for most,
and I am aware of its existence, in varying degrees,
depending on each individual's personal needs in life, and their situation,
but I'm not making that a primary concern.
Although I did just exchange a good portion of my Total Bond Index
to the TIPS fund VAIPX in the ROTH.

There's a bit more info on my situation in this post of mine in this other thread:

viewtopic.php?p=6446683#p6446683
Sounds like you are market timing.

Ignoring that for the moment, are you holding ANY stocks in the Roth? If not, you're wasting your most valuable space.

Do you have $18 K of stocks in any of your accounts? If so, you'd be better off selling $18k of stock in those accounts and rebuying it in your Roth IRA. This leaves your market position unchanged but makes better use of it.
Market timing would imply I'm "waiting" for something, or want something.
I'm not waiting for or expecting anything.

If there happens to be a fire sale someday, who doesn't like a bargain?
And if there is no fire sale, I'm fine as I am so doesn't matter.

In the ROTH I am holding:

Two different gold funds, some silver (SLV)
Vanguard LifeStrategy Growth Fund (VASGX)
Vanguard Energy Fund Investor Shares (VGENX) small amount
Vanguard Explorer Value Fund Investor Shares (VEVFX) sm cap, small amount
Teekay LNG Partners L.P. (TGP) Nat Gas

All the equities are in the ROTH already. Have held them a long time.
I-Bonds are of course at TD
"Buying on sale" is a form of timing. One can often find that the prices after a 20% drop are still higher than 2 years earlier, meaning that you would have been better off buying them at that point than now. But anyway, I don't want to derail the discussion.

My Roth question was based on a response I saw that said you're holding $18k in cash in the Roth. I may have misread / confused a post as I'm replying in mobile.

My suggestion was that holding cash in a Roth isn't a good use of that account. If you're currently happy with your asset allocation, you would be better off buying $18k of equities in your Roth and then selling an equivalent amount in your other accounts. That leaves your market position the same, but shifts the assets with the highest expected growth into the tax-free account.

As for your actual question about the intermediate treasury fund, it's a perfectly good fund. The fund's NAV will probably take some hits as interest rates rise, but if you hold it long enough, that will wash out. If the market tanks, recent history suggests that fund will be be in demand.
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by theac »

exodusNH wrote: Thu Jan 13, 2022 10:59 am
theac wrote: Thu Jan 13, 2022 9:20 am
exodusNH wrote: Thu Jan 13, 2022 8:27 am
theac wrote: Thu Jan 13, 2022 2:33 am I'm holding quite a bit of cash that is just sitting in the.03% MMkt at Schwab (beats the .01% Citibank was paying, or the .01% in Vanguard's Settlement Fund haha). I have no immediate or future planned use for it, other than just saving it.

And since I have no interest in putting anything into stock funds at this time (but that may change in the future), someone mentioned the Intermediate Term Treasury Index recently in a thread and I started considering the ETF (VGIT) at 1.30%. Or maybe even the Short Term Treasury Index ETF (VGSH) at .68%.

Either one still beats the .03% MMkt, and even the .55% at PenFed Credit Union where I had considered opening an online account, but I really don't want to add another institution to deal with. PenFed even has 15 mo CDs at 1% which I had also considered.

This is mostly taxable money, but might do the same move
for a bit of "cash" in my Vanguard ROTH Settlement Fund too.

Anyway, any ideas on that?

P.S.
I have no state taxes to deal with, only federal.

I already max-out the annual I-Bonds.

And yes, I know "inflation" is a big concern for most,
and I am aware of its existence, in varying degrees,
depending on each individual's personal needs in life, and their situation,
but I'm not making that a primary concern.
Although I did just exchange a good portion of my Total Bond Index
to the TIPS fund VAIPX in the ROTH.

There's a bit more info on my situation in this post of mine in this other thread:

viewtopic.php?p=6446683#p6446683
Sounds like you are market timing.

Ignoring that for the moment, are you holding ANY stocks in the Roth? If not, you're wasting your most valuable space.

Do you have $18 K of stocks in any of your accounts? If so, you'd be better off selling $18k of stock in those accounts and rebuying it in your Roth IRA. This leaves your market position unchanged but makes better use of it.
Market timing would imply I'm "waiting" for something, or want something.
I'm not waiting for or expecting anything.

If there happens to be a fire sale someday, who doesn't like a bargain?
And if there is no fire sale, I'm fine as I am so doesn't matter.

In the ROTH I am holding:

Two different gold funds, some silver (SLV)
Vanguard LifeStrategy Growth Fund (VASGX)
Vanguard Energy Fund Investor Shares (VGENX) small amount
Vanguard Explorer Value Fund Investor Shares (VEVFX) sm cap, small amount
Teekay LNG Partners L.P. (TGP) Nat Gas

All the equities are in the ROTH already. Have held them a long time.
I-Bonds are of course at TD
"Buying on sale" is a form of timing. One can often find that the prices after a 20% drop are still higher than 2 years earlier, meaning that you would have been better off buying them at that point than now. But anyway, I don't want to derail the discussion.

My Roth question was based on a response I saw that said you're holding $18k in cash in the Roth. I may have misread / confused a post as I'm replying in mobile.

My suggestion was that holding cash in a Roth isn't a good use of that account. If you're currently happy with your asset allocation, you would be better off buying $18k of equities in your Roth and then selling an equivalent amount in your other accounts. That leaves your market position the same, but shifts the assets with the highest expected growth into the tax-free account.

As for your actual question about the intermediate treasury fund, it's a perfectly good fund. The fund's NAV will probably take some hits as interest rates rise, but if you hold it long enough, that will wash out. If the market tanks, recent history suggests that fund will be be in demand.
All the equities I have are already in the ROTH,
PLUS the $18k "cash" in the settlement fund.
And the rest is all Total Bond and TIPS.

If I go with the Intermediate Treasury Index at 1.30%
then those $18k cash will be used for that.

I do know that cash is not the best use of ROTH or Tax-deferred space,
but I'm not going to buy something I don't want or don't need just because I have the money to do it, so...that's where I'm at.

Hence the possible Intermediate Treasury option.

And I understand that I'm not "in the herd" with how I'm handling things,
but I'm just working with my own unique set of circumstances.
"We keep you alive to serve this ship. Row well...and live." Ben Hur...and The Taxman! hahaha
exodusNH
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by exodusNH »

theac wrote: Thu Jan 13, 2022 11:08 am
exodusNH wrote: Thu Jan 13, 2022 10:59 am
theac wrote: Thu Jan 13, 2022 9:20 am
exodusNH wrote: Thu Jan 13, 2022 8:27 am
theac wrote: Thu Jan 13, 2022 2:33 am I'm holding quite a bit of cash that is just sitting in the.03% MMkt at Schwab (beats the .01% Citibank was paying, or the .01% in Vanguard's Settlement Fund haha). I have no immediate or future planned use for it, other than just saving it.

And since I have no interest in putting anything into stock funds at this time (but that may change in the future), someone mentioned the Intermediate Term Treasury Index recently in a thread and I started considering the ETF (VGIT) at 1.30%. Or maybe even the Short Term Treasury Index ETF (VGSH) at .68%.

Either one still beats the .03% MMkt, and even the .55% at PenFed Credit Union where I had considered opening an online account, but I really don't want to add another institution to deal with. PenFed even has 15 mo CDs at 1% which I had also considered.

This is mostly taxable money, but might do the same move
for a bit of "cash" in my Vanguard ROTH Settlement Fund too.

Anyway, any ideas on that?

P.S.
I have no state taxes to deal with, only federal.

I already max-out the annual I-Bonds.

And yes, I know "inflation" is a big concern for most,
and I am aware of its existence, in varying degrees,
depending on each individual's personal needs in life, and their situation,
but I'm not making that a primary concern.
Although I did just exchange a good portion of my Total Bond Index
to the TIPS fund VAIPX in the ROTH.

There's a bit more info on my situation in this post of mine in this other thread:

viewtopic.php?p=6446683#p6446683
Sounds like you are market timing.

Ignoring that for the moment, are you holding ANY stocks in the Roth? If not, you're wasting your most valuable space.

Do you have $18 K of stocks in any of your accounts? If so, you'd be better off selling $18k of stock in those accounts and rebuying it in your Roth IRA. This leaves your market position unchanged but makes better use of it.
Market timing would imply I'm "waiting" for something, or want something.
I'm not waiting for or expecting anything.

If there happens to be a fire sale someday, who doesn't like a bargain?
And if there is no fire sale, I'm fine as I am so doesn't matter.

In the ROTH I am holding:

Two different gold funds, some silver (SLV)
Vanguard LifeStrategy Growth Fund (VASGX)
Vanguard Energy Fund Investor Shares (VGENX) small amount
Vanguard Explorer Value Fund Investor Shares (VEVFX) sm cap, small amount
Teekay LNG Partners L.P. (TGP) Nat Gas

All the equities are in the ROTH already. Have held them a long time.
I-Bonds are of course at TD
"Buying on sale" is a form of timing. One can often find that the prices after a 20% drop are still higher than 2 years earlier, meaning that you would have been better off buying them at that point than now. But anyway, I don't want to derail the discussion.

My Roth question was based on a response I saw that said you're holding $18k in cash in the Roth. I may have misread / confused a post as I'm replying in mobile.

My suggestion was that holding cash in a Roth isn't a good use of that account. If you're currently happy with your asset allocation, you would be better off buying $18k of equities in your Roth and then selling an equivalent amount in your other accounts. That leaves your market position the same, but shifts the assets with the highest expected growth into the tax-free account.

As for your actual question about the intermediate treasury fund, it's a perfectly good fund. The fund's NAV will probably take some hits as interest rates rise, but if you hold it long enough, that will wash out. If the market tanks, recent history suggests that fund will be be in demand.
All the equities I have are already in the ROTH,
PLUS the $18k "cash" in the settlement fund.
And the rest is all Total Bond and TIPS.

If I go with the Intermediate Treasury Index at 1.30%
then those $18k cash will be used for that.

I do know that cash is not the best use of ROTH or Tax-deferred space,
but I'm not going to buy something I don't want or don't need just because I have the money to do it, so...that's where I'm at.

Hence the possible Intermediate Treasury option.

And I understand that I'm not "in the herd" with how I'm handling things,
but I'm just working with my own unique set of circumstances.
I'm not suggesting that.

Let's say you have a 401k that $18k of mutual fund X, or some set of funds, X, Y, and Z that total to $18k. You could do this in taxable, too, but you've got to watch out for taxes.

What I was suggesting is that you could sell X, Y, and Z in your 401k/tIRA, put the money in the stable value fund or bond fund or whatever and then rebuy the $18k of X, Y, and Z in your Roth.

Your net position hasn't changed. However, you have set yourself up to benefit from the higher expected growth in your tax-free fund, without taking on additonal risk or buying something you don't want. You're just taking money from one pocket and moving it to the other. In this case, "the other pocket" prevents the government from picking it! It's a better pocket to hold the assets that have the highest expected return.
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nisiprius
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by nisiprius »

In order to decide how you feel about the amount of risk involved, take a look at Using mutual funds and ETFs for short-term savings (1 year), particularly the entries for Vanguard Short-Term Treasury and VFITX, Vanguard Intermediate-Term Treasury.

Over the historical periods shown, an investment of $10,000, held for a year,
  • would have underperformed a money market fund 97 times out of 326; the average shortfall for those periods was -$131.29.
  • would have actually lost money 19 times out of 326, the average loss for those periods being -$32.68
That isn't going to ruin you, but it could be aggravating to invest in a short-term Treasury fund in order to beat a money market fund and actually make less, and even more aggravating to lose money.

For VFITX, the comparable numbers are:
  • would have underperformed a money market fund 95/326 times, with an average shortfall of -$298.08
  • would have lost money 56/326 times, the average loss being -$192.03
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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vineviz
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by vineviz »

theac wrote: Thu Jan 13, 2022 9:20 am Market timing would imply I'm "waiting" for something, or want something.
I'm not waiting for or expecting anything.
You're waiting for a chance to buy something (stocks?) at a cheaper price in the future, right?

If the only thing stopping you from using your cash to buy stocks or bonds now is the expectation that you'll be able to buy them cheaper later, that's the very definition of market timing. That behavior might strike you as reasonable, given your circumstances, but it is what it is.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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theac
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by theac »

vineviz wrote: Thu Jan 13, 2022 12:26 pm
theac wrote: Thu Jan 13, 2022 9:20 am Market timing would imply I'm "waiting" for something, or want something.
I'm not waiting for or expecting anything.
You're waiting for a chance to buy something (stocks?) at a cheaper price in the future, right?

If the only thing stopping you from using your cash to buy stocks or bonds now is the expectation that you'll be able to buy them cheaper later, that's the very definition of market timing. That behavior might strike you as reasonable, given your circumstances, but it is what it is.
No.
That is exactly NOT what I'm doing.

I understand that people feel more comfortable when they can put something in a box, but not everything fits into a box.

It's really very simple, I'm just looking for a place to store extra cash.
I understand there is a price to pay for that "luxury,"
and nowadays people call that price "inflation."

I recognize and accept that is the price of entry, or the penalty,
however one chooses to look at it.

And I can live with that.

If you go to Vegas and just keep your money in your pocket, the ones with their money on the table are gonna think you're nuts. You have an opportunity in front of you to make more money and you're not taking it?

Vegas never did anything for me. I was quite happy with my money in my pocket.
At least Laughlin had a nice river to look at, but to each their own.

I like rivers! :D

And when you worry too much about "what I can GET,"
you miss out on the river.

Anyway, sounds like a Treasury bond ETF may be passive enough to meet my needs, and if the money sits there till the day I die, oh well, had to keep it somewhere.

I'm not looking for a 1 year solution,
or a "future buying opportunity" that may never come, etc.

Just a reasonably comfortable place to keep the money in my pocket so to say.
And just comparing the options. And I appreciate everyone's input because I get presented with options I wouldn't have known about otherwise. Then I can pick the one I'm comfortable with.
"We keep you alive to serve this ship. Row well...and live." Ben Hur...and The Taxman! hahaha
hudson
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by hudson »

Theac,

For me, it's all about the holdings.
Safe holdings rank at the top of my list.
Treasuries and CDs are all good.
Durations matter.
chrisdds98
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by chrisdds98 »

theac wrote: Thu Jan 13, 2022 7:15 am
Wiggums wrote: Thu Jan 13, 2022 6:20 am How much cash are you talking about? The highest yielding CD might be the best fit for you. As the interest rates rise, the bond funds will take a hit. Personally, i’d rather have some market risk than lose money to inflation over the next 24-36 months.
Between the Short term and the Intermediate term Treasury indexes,
what would be the main pros and cons:

1. If inflation goes up a lot?

2. If inflation stays where it is or goes down?
I think the important thing is a change in inflation expectations. if it is more likely that we get higher inflation, we're more likely to get higher interest rates which would negatively affect the longer duration term more than the short term. if it were me I would do half tips/half nominal treasuries in the duration you prefer.
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vineviz
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by vineviz »

theac wrote: Thu Jan 13, 2022 8:25 pm
vineviz wrote: Thu Jan 13, 2022 12:26 pm
theac wrote: Thu Jan 13, 2022 9:20 am Market timing would imply I'm "waiting" for something, or want something.
I'm not waiting for or expecting anything.
You're waiting for a chance to buy something (stocks?) at a cheaper price in the future, right?

If the only thing stopping you from using your cash to buy stocks or bonds now is the expectation that you'll be able to buy them cheaper later, that's the very definition of market timing. That behavior might strike you as reasonable, given your circumstances, but it is what it is.
No.
That is exactly NOT what I'm doing.

I understand that people feel more comfortable when they can put something in a box, but not everything fits into a box.
Did you not write this earlier: "If there happens to be a fire sale someday, who doesn't like a bargain?"
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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theac
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Re: "Cash" alternates: Short/Med Term Treasuries? Or?

Post by theac »

vineviz wrote: Thu Jan 13, 2022 9:17 pm
theac wrote: Thu Jan 13, 2022 8:25 pm
vineviz wrote: Thu Jan 13, 2022 12:26 pm
theac wrote: Thu Jan 13, 2022 9:20 am Market timing would imply I'm "waiting" for something, or want something.
I'm not waiting for or expecting anything.
You're waiting for a chance to buy something (stocks?) at a cheaper price in the future, right?

If the only thing stopping you from using your cash to buy stocks or bonds now is the expectation that you'll be able to buy them cheaper later, that's the very definition of market timing. That behavior might strike you as reasonable, given your circumstances, but it is what it is.
No.
That is exactly NOT what I'm doing.

I understand that people feel more comfortable when they can put something in a box, but not everything fits into a box.
Did you not write this earlier: "If there happens to be a fire sale someday, who doesn't like a bargain?"
Yes, but that doesn't mean I'm "hoping" for a fire, paying an arsonist to start one, losing sleep over it if there never is a fire, will feel cheated if there is no fire, will be suddenly immortal if there is a fire, or I'm sitting on the edge of my chair glued to a monitor waiting for a fire, holding my breath for a fire, or even if there is a fire that I will even buy anything...I don't know how else to say it in words.

In other words, my questions are not related to some Master Plan where I'm going to make a killing down the road.

But let's just say, to put an end to something that has nothing to do with what prompted my original inquiry about where to store money, that "it is" market timing, and I did have some such Master Plan.

So what? Will I be on the FBI's wanted list?
Does it rank up there with murder? :D

And does it really matter what I say, once someone has already decided that they know my intentions even better than I do?

I'm at a loss at how to explain it, and can't even understand why I would have to, nor can I really say what box "it" would fit into, or if there even is one.

But I appreciate your concern. :sharebeer
"We keep you alive to serve this ship. Row well...and live." Ben Hur...and The Taxman! hahaha
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