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More fine journalism - STSBX may have had a 10 year return (not yield) of something approaching 3%, but its current SEC yield is 0.21%, and trailing twelve month yield is 0.51%. Its 78 basis point ER might have something to do with that, even if you did purchase it load-waived (e.g. TD Ameritrade).
Fidelity announced months ago that it was significantly reducing its offering of MMFs as brokerage "core" (settlement) funds. It seems that they now offer only Fidelity Cash (a general obligation of the brokerage company), and a couple of government MMFs. No more muni funds. FWIW, you're losing on interest, because 0.01% tax free (muni fund) was better than 0.01% taxable
My bottom line - stick with FDIC-insured bank accounts paying 1% or better if you need something entirely liquid (up to six withdrawals per month for these savings accounts). CDs, I-bonds, etc. for "cash" (no fluctuation in value) with somewhat less liquidity (early withdrawal penalties mostly).
Seems my below comment will fit well in several threads.
This is how I played the low yield cash environment.
I closed out my money market and CD's years back after the yield's of each went next to nothing; and, I took up positions in a few short term bond funds with some of this money which is a part of my fixed income sleeve. You might say, that short term bond funds have now become high risk cash positions with me.
The low return on cash has effected my portfolio's overall return greatly as I use to be able to get a four to five percent retrun on my cash ... and, well, now next to nothing ... and cash usually makes up about 15% to 20% of my overall portfolio.
This has forced me to make some special spiff positions within the markets, form time-to-time, to help make some of my cash more productive. Thus far it has ... but, has not fully covered the prior yields of four to five percent once had. And, last year the spiffs were few and far between. I am still with the October 2014 Spiff with an average cost of 1905 on the S&P 500 Index. This puts this spiff thus far at about a 10.2% return. But, it would take a number of these to cover the full four to five percent yield I was earning on all of my cash since these spiff positions are much smaller in size than my total cash position.
I am wondering what you might have done to deal with this low return on cash environment?
How about a list of best ideas for holding / managing "cash/short term money" (use of mutual funds welcome):
I am trying to peel off the quarterly differential between PONDX and PSHDX.
Usually this means moving the difference out of PONDX and into PSHDX. When this dynamic switching over multiple quarter (maybe as a result of interest rates rising or management) it will be something I will be able to see and act on.
I use these two funds because I am able to exchange out of one and into the other on the same day (exchange option where funds need to be in the same fund family).
When you say ... "I am trying to peal off the quarterly differential between PONDX and PSHDX." ... And, "... moving the difference out of PONDX and into PSHDX."
I might have missed something ... but, how is the rebalancing, of sorts, helping improve your position? Would it not be best to leave the money in the higher return fund?
Just asking for my better understanding. I am sure it would have to be of some benefit for you to go to these measures. I seemed to have missed it.
The differential to me is the risk premium, so peeling off the the risk premium is an actionable strategy that hopefully acts to lower my overall portfolio risk as well as capture gains.
Much like an equity position provides a higher risk/reward profile than most bonds, certain bonds have a higher risk/reward profile than other bonds. I think of it as an additional quarterly "dividend" for holding a riskier asset. In this case, the "additional dividend" is the performance differential between two bond funds with different risk/reward profiles.
PSHDX has a lower risk/reward profile than PONDX, but occasionally PONDX will under perform PSHDX. This has usually been a brief single quarter occurrence. When this changes and PONDX shows continual under performance I will notice it (since I monitor it) and I will act by possibly reducing or eliminating PONDX.
I'm looking for persistent out performance as a reason to hold riskier assets. I use less risky assets as a guage and as the place where gains are gathered. The less risky asset can then serve as a place to distribute income (in retirement) or a place to turn for dry powder.
To take this one step farther, image a three fund risk sleeve: PCKDX, PONDX and PSHDX. I first identify these funds as part of my PIMCO risk/reward sleeve. I choose funds that move farther out on the risk/reward spectrum and also are top performers in their respective sectors. So long as the higher risk fund out performs the lower risk fund(s) I maintain a position in the higher risk asset. Quarterly I compare the relative performance of PCKDX to PONDX and PSHDX. If the differential are positive I gather the gains by selling into the less risky asset on the sleeve ladder. Last quarter I had to skip a rung (moved gains from PCKDX to PSHDX) as illustrated in the chart below for Q4 2014:
Comments
More interesting to me is the reference to another WSJ article about Fidelity (and others) changing their MMFs. You can find the full article via Google, here:
https://www.google.com/search?q=Advisers+Prepare+for+Changes+to+Money-Market+Funds&ie=utf-8&oe=utf-8
Fidelity announced months ago that it was significantly reducing its offering of MMFs as brokerage "core" (settlement) funds. It seems that they now offer only Fidelity Cash (a general obligation of the brokerage company), and a couple of government MMFs. No more muni funds. FWIW, you're losing on interest, because 0.01% tax free (muni fund) was better than 0.01% taxable
Seems that Fidelity puts at least part of the blame for this change on SEC regulations. Here's their office memo explaining the changes and rationales:
https://familyoffice.fidelity.com/app/literature/view?itemCode=9860767&renditionType=pdf
My bottom line - stick with FDIC-insured bank accounts paying 1% or better if you need something entirely liquid (up to six withdrawals per month for these savings accounts). CDs, I-bonds, etc. for "cash" (no fluctuation in value) with somewhat less liquidity (early withdrawal penalties mostly).
http://www.mutualfundobserver.com/discuss/discussion/19149/new-regulations-spell-the-end-of-money-market-funds#latest
Seems my below comment will fit well in several threads.
This is how I played the low yield cash environment.
I closed out my money market and CD's years back after the yield's of each went next to nothing; and, I took up positions in a few short term bond funds with some of this money which is a part of my fixed income sleeve. You might say, that short term bond funds have now become high risk cash positions with me.
The low return on cash has effected my portfolio's overall return greatly as I use to be able to get a four to five percent retrun on my cash ... and, well, now next to nothing ... and cash usually makes up about 15% to 20% of my overall portfolio.
This has forced me to make some special spiff positions within the markets, form time-to-time, to help make some of my cash more productive. Thus far it has ... but, has not fully covered the prior yields of four to five percent once had. And, last year the spiffs were few and far between. I am still with the October 2014 Spiff with an average cost of 1905 on the S&P 500 Index. This puts this spiff thus far at about a 10.2% return. But, it would take a number of these to cover the full four to five percent yield I was earning on all of my cash since these spiff positions are much smaller in size than my total cash position.
I am wondering what you might have done to deal with this low return on cash environment?
Old_Skeet
I am trying to peel off the quarterly differential between PONDX and PSHDX.
Usually this means moving the difference out of PONDX and into PSHDX. When this dynamic switching over multiple quarter (maybe as a result of interest rates rising or management) it will be something I will be able to see and act on.
I use these two funds because I am able to exchange out of one and into the other on the same day (exchange option where funds need to be in the same fund family).
When you say ... "I am trying to peal off the quarterly differential between PONDX and PSHDX." ... And, "... moving the difference out of PONDX and into PSHDX."
I might have missed something ... but, how is the rebalancing, of sorts, helping improve your position? Would it not be best to leave the money in the higher return fund?
Just asking for my better understanding. I am sure it would have to be of some benefit for you to go to these measures. I seemed to have missed it.
Old_Skeet
Just a little experiment I'm trying.
The differential to me is the risk premium, so peeling off the the risk premium is an actionable strategy that hopefully acts to lower my overall portfolio risk as well as capture gains.
Much like an equity position provides a higher risk/reward profile than most bonds, certain bonds have a higher risk/reward profile than other bonds. I think of it as an additional quarterly "dividend" for holding a riskier asset. In this case, the "additional dividend" is the performance differential between two bond funds with different risk/reward profiles.
PSHDX has a lower risk/reward profile than PONDX, but occasionally PONDX will under perform PSHDX. This has usually been a brief single quarter occurrence. When this changes and PONDX shows continual under performance I will notice it (since I monitor it) and I will act by possibly reducing or eliminating PONDX.
I'm looking for persistent out performance as a reason to hold riskier assets. I use less risky assets as a guage and as the place where gains are gathered. The less risky asset can then serve as a place to distribute income (in retirement) or a place to turn for dry powder.
To take this one step farther, image a three fund risk sleeve: PCKDX, PONDX and PSHDX. I first identify these funds as part of my PIMCO risk/reward sleeve. I choose funds that move farther out on the risk/reward spectrum and also are top performers in their respective sectors. So long as the higher risk fund out performs the lower risk fund(s) I maintain a position in the higher risk asset. Quarterly I compare the relative performance of PCKDX to PONDX and PSHDX. If the differential are positive I gather the gains by selling into the less risky asset on the sleeve ladder. Last quarter I had to skip a rung (moved gains from PCKDX to PSHDX) as illustrated in the chart below for Q4 2014: