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In order to secure yield in this market climate one must know they are taking on more risk than what cash, money market or cd's provide. If one is willing to accept more risk look into short term bond funds including short term muni funds.
As I have had some cd's to mature the past couple of years I chose to take on the associated risk to acomplish my thurst for yield. I ventured into some of the above plus some good dividend paying equities and mutual funds of same along with making a few special short term momentum positions to capture upward equity movement. Thus far this year ... I am up better than four percent on my special short term equity momentum positions.
I have provided a link below that might assist you in making a fund selection.
The key, as you stated, is not worry about losing a LOT. If it is not FDIC insured, you can lose value. (And FDIC does not breed a lot of confidence, either. But for now, at least, it is a guarantor of safety.) We use NEARX for taxable accounts and ACSNX where taxes are not a consideration. Both have done really well the last 2-3 years. Another option is VMLTX. Then again, some online banks offer savings accounts with current yields of 0.80% or better. You have to decide wiether the higher yields are worth the lack of insurance. As long as interest rates remain steady, the fund options will probably be very attractive.
Reply to @BobC: Taking a look at US Global Investors Near-Term Tax Free Fund (NEARX) - the bottom line looks nice, but there are details that leave me wondering a bit. So I'm curious about your thoughts on them:
- Fee waiver is in effect (very nice current ER of 0.45%, but this can be withdrawn at any time, and actual fees would be 1.30%).
- 15% in cash, meaning taxable income (to the extent that cash generates any income these days). Personally I consider this a slight plus, as it can easily meet redemption requests. (Wouldn't be a plus for funds designed for longer term investments.)
- Largest state holding - Illinois (the only state I think I put on my "avoid" list) - 14%
- SEC yield of 1.24% (is it worth the risk?)
- very small AUM ($35M)
- may be subject to AMT
FWIW, this is available NTF at Vanguard and elsewhere (but not Schwab or Fidelity)
(As a side note, M* reports the turnover for this short term bond fund at 1%, so when you hear that bond funds must by their nature have high turnovers, it's fair to question this.)
I use Vanguard Ltd Term Tax Exempt VMLTX now (which Bob mentions above) & have used the V. short bond index VBISX (a lot of Treasuries) and the short term investment grade fund VFSTX (mostly corporates) in the past.
Reply to @fundalarm: I think you might be reacting to the fund's name rather than to its strategy. They invest in called high yield bonds and similar instruments; that is, formerly higher-risk creatures which are now in their last 30 days of existence. The manager only invests where he believes that the issuer will have the money in 30 days to meet the promise s/he made today. By his recollection, there has been one called high-yield bond in the past 20 years that went belly-up. The portfolio does contain other securities, but most match that pattern: fragments of bonds which have been or, he believes, will be cash in the near future.
Reply to @Old_Joe: Good theory, but trading costs are not included in the ER (wish that they were; they're not even included as part of "other expenses").
Reply to @msf: The fee waiver you mention is a non-issue for me, since we could liquidate holdings at any time. Sure, they could withdraw the waiver, but my discussions with them indicate that is not even remote at this time. I agree that cash is a plus, and they would tell you that cash is a bit high because they are having difficulty buying A-rated or better bonds and attractive prices right now.
We address concerns over Illinois, etc. in the same way we would with the fee waiver. We also watch the NAV over a period of time, and so we have a pretty comfortable feeling of what is "normal", I hope. Daily lilquidity, again, is a comfort level for us and our clients.
As for the current yield, it certainly is attractive to our clients in high federal brackets. That's around 1.85% or better on a taxable account, and I have not seen any savings, CDs, etc. to compare.
Small assets in the fund. It's more than doubled in the last 3 years, as investors look for the same things this thread is discussing. When yields go up and CDs become more attractive, assets could decline. The AMT issue may be valid, but so far we have not had an issue with that. Turnover has historically been low for this fund. And VMLTX and LTMIX also have relatively low turnovers, but not as low as NEARX. Is the number valid? I think it is pretty close, at least in the last year.
For sure NEARX is not for everyone, but it has worked ok for us so far. You raise good questions, so thanks for the comments. They are helpful to everyone.
Hi Bob- Personally, I'd much rather that a fund sit on cash if they can't find exactly what they want to buy at the moment. Much better than just buying "something" that really doesn't meet spec.
Reply to @BobC: Thanks for the thoughtful responses. FWIW, I checked with WellsTrade (the only brokerage that I know w/o its own short term redemption fee) and NEARX isn't carried there. So if one wants it with a fast trigger, one may need to buy it direct.
Prospectus seems to suggest (in text) that the fund has short term trading fee, but it isn't listed in the table of fees, so I'm guessing that the fund has the right to impose such a fee, but isn't currently.
(All this is by way of considering whether one can pull out quickly if fees rise. After six months, it may not really matter (past the short term redemption fee period at brokers that carry the fund).
Reply to @msf: I have a self-directed 401k access through JP Morgan Chase ( http://www.retirementbrokerage.com ) and they also do not impose additional holding periods on top of fund early redemption periods. Previous URL is basically the same as https://chaseonline.chase.com/ except they show somewhat different branding on the home page.
Reply to @Investor: Interesting. I've not seen them provide a discount brokerage to retail customers. All I've ever been able to find is "Contact a Financial Advisor", from which I infer full service, full fee brokerage. At least they seem to be doing fine for you (via 401k).
Of course you're right about the two links being essentially the same. They both log you into one's Chase accounts.
Comments
In order to secure yield in this market climate one must know they are taking on more risk than what cash, money market or cd's provide. If one is willing to accept more risk look into short term bond funds including short term muni funds.
As I have had some cd's to mature the past couple of years I chose to take on the associated risk to acomplish my thurst for yield. I ventured into some of the above plus some good dividend paying equities and mutual funds of same along with making a few special short term momentum positions to capture upward equity movement. Thus far this year ... I am up better than four percent on my special short term equity momentum positions.
I have provided a link below that might assist you in making a fund selection.
http://moneycentral.msn.com/investor/partsub/funds/topfunds.asp
Good Investing,
Skeeter
There could be other choices, but one we use with our Fidelity accts is FBNDX.
Regards,
Catch
Taking a look at US Global Investors Near-Term Tax Free Fund (NEARX) - the bottom line looks nice, but there are details that leave me wondering a bit. So I'm curious about your thoughts on them:
- Fee waiver is in effect (very nice current ER of 0.45%, but this can be withdrawn at any time, and actual fees would be 1.30%).
- 15% in cash, meaning taxable income (to the extent that cash generates any income these days). Personally I consider this a slight plus, as it can easily meet redemption requests. (Wouldn't be a plus for funds designed for longer term investments.)
- Largest state holding - Illinois (the only state I think I put on my "avoid" list) - 14%
- SEC yield of 1.24% (is it worth the risk?)
- very small AUM ($35M)
- may be subject to AMT
FWIW, this is available NTF at Vanguard and elsewhere (but not Schwab or Fidelity)
(As a side note, M* reports the turnover for this short term bond fund at 1%, so when you hear that bond funds must by their nature have high turnovers, it's fair to question this.)
For what it's worth,
David
I've also mixed in some ARBFX, VWINX and VFIIX and I sleep just fine. Upside is very limited, but low volatility is key.
Good theory, but trading costs are not included in the ER (wish that they were; they're not even included as part of "other expenses").
WSJ: The Hidden Costs of Mutual Funds
The fee waiver you mention is a non-issue for me, since we could liquidate holdings at any time. Sure, they could withdraw the waiver, but my discussions with them indicate that is not even remote at this time. I agree that cash is a plus, and they would tell you that cash is a bit high because they are having difficulty buying A-rated or better bonds and attractive prices right now.
We address concerns over Illinois, etc. in the same way we would with the fee waiver. We also watch the NAV over a period of time, and so we have a pretty comfortable feeling of what is "normal", I hope. Daily lilquidity, again, is a comfort level for us and our clients.
As for the current yield, it certainly is attractive to our clients in high federal brackets. That's around 1.85% or better on a taxable account, and I have not seen any savings, CDs, etc. to compare.
Small assets in the fund. It's more than doubled in the last 3 years, as investors look for the same things this thread is discussing. When yields go up and CDs become more attractive, assets could decline. The AMT issue may be valid, but so far we have not had an issue with that. Turnover has historically been low for this fund. And VMLTX and LTMIX also have relatively low turnovers, but not as low as NEARX. Is the number valid? I think it is pretty close, at least in the last year.
For sure NEARX is not for everyone, but it has worked ok for us so far. You raise good questions, so thanks for the comments. They are helpful to everyone.
Thanks for the thoughtful responses. FWIW, I checked with WellsTrade (the only brokerage that I know w/o its own short term redemption fee) and NEARX isn't carried there. So if one wants it with a fast trigger, one may need to buy it direct.
Prospectus seems to suggest (in text) that the fund has short term trading fee, but it isn't listed in the table of fees, so I'm guessing that the fund has the right to impose such a fee, but isn't currently.
(All this is by way of considering whether one can pull out quickly if fees rise. After six months, it may not really matter (past the short term redemption fee period at brokers that carry the fund).
Of course you're right about the two links being essentially the same. They both log you into one's Chase accounts.