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I am holding a lot of cash in my taxable account 15% tax bracket and want to find a place to park some . Any suggestions on either taxable or non taxable investment?
I have been eyeing multi-asset income funds for near cash investing. They invest in preferred stocks and dividend payers, REITs, fixed income and cash equivalents. I don't expect big gains but hopefully better than the money markets are giving out. There is some added risk but with MM funds you are losing purchasing power also.
I will add that six months ago I moved some of my portfolio into such a fund as I am right at the retirement age.
Shoot - When the 10 year spiked to 2.4+ I was thinking about a short or intermediate term muni fund. But, didn't have that much to park, so held off. T. Rowe Price has one I've used in the past - you can probably do better on fees. Won't make a lot. But, for the most part, exempt from Federal taxes. Too late now. But look at these if rate gets back up there in next month or so.
I have been eyeing multi-asset income funds for near cash investing. They invest in preferred stocks and dividend payers, REITs, fixed income and cash equivalents. I don't expect big gains but hopefully better than the money markets are giving out. There is some added risk but with MM funds you are losing purchasing power also.
I will add that six months ago I moved some of my portfolio into such a fund as I am right at the retirement age.
Hi John,
What types of funds are you looking at? Just curious if you could give a few examples. Thanks, Will
@willmatt72, Certainly. Blackrock has BIICX. Others are PMFYX, SECMX, ISFAX for a few. The TRowe Price Spectrum Fund, RPSIX, falls into this category as well. IShares has the IYLD ETF.
Since I use American Century I have AMJVX. It's fairly new however. There are many others around.
Some like the fund I own are unconstrained so that adds another possibility.
Yes, I would say so based on the holdings in *M. It also holds large cap stocks (both foreign and domestic) that pay dividends. I would be curious to do a chart comparison with this fund and a high yield index just to see how much they run together.
Re JohnChisum's "I have been eyeing multi-asset income funds for near cash investing ... The TRowe Price Spectrum Fund. RPSIX, falls into this category as well." -
I don't know what type of risk profile ron (original poster) is looking for in his cash alternative. Possibly, RPSIX would fit the bill. I love the fund. In fact, it's grown to be my largest single holding.
But, just to put things here into perspective, let's take a closer look at RPSIX. It's hard for me to see how a fund with the following risk characteristics could in any way shape or form be considered an acceptable substitute for cash - or even "near cash" for that matter.
Per Price's most recent fund Prospectus, Spectrum Income may invest in the following assets (among others) up to the allowable percentages listed.
Emerging Market Bonds ......... 30% High Yield Debt (junk bonds)... 25% Stocks ..................................... 25% International Bonds ................. 20% Long Term Treasury Bonds .....15%
Now, compare that to Price's Prime Reserve money market fund which invests only in debt rated AA or higher and typically limits average maturity to 90 days or less. Compare the two - RPSIX and the money market fund. Notice the difference in risk profiles.
Don't just take my word for it. Here's what T. Rowe Price says in their own words about the risks of investing in the Spectrum Income Fund (from the fund's Prospectus): -
"Principal Risks ...
"Asset allocation risk The fund’s risks will directly correspond to the risks of the underlying funds in which it invests. By investing in many underlying funds, the fund has partial exposure to the risks of many different areas of the market .....
"Interest rate risk A rise in interest rates could cause the price of a bond fund in which the fund invests to fall. Generally, securities with longer maturities and funds with longer weighted average maturities carry greater interest rate risk.
"Credit risk An issuer of a debt security held by an underlying bond fund could be downgraded or default, thereby negatively affecting the fund’s price or yield. The fund is exposed to greater credit risk to the extent it invests in underlying funds that hold high yield bonds. Issuers of high yield bonds are usually not as strong financially and the securities they issue carry a higher risk of default and should be considered speculative.
"Liquidity risk This is the risk that the fund may not be able to sell a holding in a timely manner at a desired price.
"International investing risk Investing in the securities of non-U.S. issuers involves special risks not typically associated with investing in U.S. issuers. International securities tend to be more volatile and less liquid than investments in U.S. securities and may lose value because of adverse political, social, or economic developments overseas, or due to changes in the exchange rates between foreign currencies and the U.S. dollar. In addition, international investments are subject to settlement practices and regulatory and financial reporting standards that differ from those of the U.S.
"Emerging markets risk The risks of international investing are heightened for securities of issuers in emerging market countries. Emerging market countries tend to have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries. In addition to all of the risks of investing in international developed markets, emerging markets are more susceptible to governmental interference, local taxes being imposed on international investments, restrictions on gaining access to sales proceeds, and less liquid and less efficient trading markets.
"Dividend-paying stock risk To the extent the fund invests in an underlying fund that focuses on stocks, it is exposed to greater volatility and the risk of stock market declines that could cause the fund to underperform bond funds with similar objectives. Stocks of established companies paying high dividends may not participate in a broad market advance to the same degree as most other stocks, and a sharp rise in interest rates could cause a company to reduce or eliminate its dividend."
It pays 1.05% for a savings account, and currently 2.25% on a 5-year CD.
Not great, but it beats getting paid 0% interest keeping that cash in a brokerage acct. If rates go up significantly, you can get out of the CD by paying 180 days' worth of interest as a penalty, just on the amount taken out of the CD. (You could put that money in a higher rate CD if rates went up sig).
As far as a "near cash alternative", some people might incline towards short term high quality bond funds....
Comments
Derf
P.S. Let me know what you think.
I will add that six months ago I moved some of my portfolio into such a fund as I am right at the retirement age.
Confucius say: He who hesitates is lost.
What types of funds are you looking at? Just curious if you could give a few examples. Thanks,
Will
Since I use American Century I have AMJVX. It's fairly new however. There are many others around.
Some like the fund I own are unconstrained so that adds another possibility.
-
I don't know what type of risk profile ron (original poster) is looking for in his cash alternative. Possibly, RPSIX would fit the bill. I love the fund. In fact, it's grown to be my largest single holding.
But, just to put things here into perspective, let's take a closer look at RPSIX. It's hard for me to see how a fund with the following risk characteristics could in any way shape or form be considered an acceptable substitute for cash - or even "near cash" for that matter.
Per Price's most recent fund Prospectus, Spectrum Income may invest in the following assets (among others) up to the allowable percentages listed.
Emerging Market Bonds ......... 30%
High Yield Debt (junk bonds)... 25%
Stocks ..................................... 25%
International Bonds ................. 20%
Long Term Treasury Bonds .....15%
Now, compare that to Price's Prime Reserve money market fund which invests only in debt rated AA or higher and typically limits average maturity to 90 days or less. Compare the two - RPSIX and the money market fund. Notice the difference in risk profiles.
Don't just take my word for it. Here's what T. Rowe Price says in their own words about the risks of investing in the Spectrum Income Fund (from the fund's Prospectus):
-
"Principal Risks ...
"Asset allocation risk The fund’s risks will directly correspond to the risks of the underlying funds in which it invests. By investing in many underlying funds, the fund has partial exposure to the risks of many different areas of the market .....
"Interest rate risk A rise in interest rates could cause the price of a bond fund in which the fund invests to fall. Generally, securities with longer maturities and funds with longer weighted average maturities carry greater interest rate risk.
"Credit risk An issuer of a debt security held by an underlying bond fund could be downgraded or default, thereby negatively affecting the fund’s price or yield. The fund is exposed to greater credit risk to the extent it invests in underlying funds that hold high yield bonds. Issuers of high yield bonds are usually not as strong financially and the securities they issue carry a higher risk of default and should be considered speculative.
"Liquidity risk This is the risk that the fund may not be able to sell a holding in a timely manner at a desired price.
"International investing risk Investing in the securities of non-U.S. issuers involves special risks not typically associated with investing in U.S. issuers. International securities tend to be more volatile and less liquid than investments in U.S. securities and may lose value because of adverse political, social, or economic developments overseas, or due to changes in the exchange rates between foreign currencies and the U.S. dollar. In addition, international investments are subject to settlement practices and regulatory and financial reporting standards that differ from those of the U.S.
"Emerging markets risk The risks of international investing are heightened for securities of issuers in emerging market countries. Emerging market countries tend to have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries. In addition to all of the risks of investing in international developed markets, emerging markets are more susceptible to governmental interference, local taxes being imposed on international investments, restrictions on gaining access to sales proceeds, and less liquid and less efficient trading markets.
"Dividend-paying stock risk To the extent the fund invests in an underlying fund that focuses on stocks, it is exposed to greater volatility and the risk of stock market declines that could cause the fund to underperform bond funds with similar objectives. Stocks of established companies paying high dividends may not participate in a broad market advance to the same degree as most other stocks, and a sharp rise in interest rates could cause a company to reduce or eliminate its dividend."
Link to Prospectus: http://individual.troweprice.com/staticFiles/gcFiles/pdf/trspi.pdf
(See pages 7-12 for referenced/excerpted content.)
https://www.synchronybank.com/banking/index.htm
It pays 1.05% for a savings account, and currently 2.25% on a 5-year CD.
Not great, but it beats getting paid 0% interest keeping that cash in a brokerage acct.
If rates go up significantly, you can get out of the CD by paying 180 days' worth of interest as a penalty, just on the amount taken out of the CD. (You could put that money in a higher rate CD if rates went up sig).
As far as a "near cash alternative", some people might incline towards short term high quality bond funds....