BlackRock: How To Rev Up Your Idle Cash

Ted

FYI: New York City has stringent anti-idling laws for parked vehicles. The City even pays bounties for citizens who send in video evidence of people sitting in their cars with their motors running. The spirit of the law is to prevent wasting gas and to improve community conditions.

Leaving cash in your brokerage account is akin to burning fuel without getting anywhere. It’s not productive for you or your long-term investment goals. I’m anti-idling for the long-term investor. Cash is basically a zero-expected return asset class. But the reality is that there’s always going to be some cash in your brokerage account. Cash generally comes from deposits you make, proceeds from selling your investments and dividends. And some investors simply prefer having some portion of a portfolio in the safety and surety of cash.
Regards,
Ted
https://www.blackrockblog.com/2018/08/15/avoid-idle-cash/?utm_source=blog&utm_medium=hero&utm_campaign=hero

Ted

@ MFO Members: Here is the difference in yield between Morgan Stanley's Sweeps account and several of their Money Market Funds. Proceeds from sells, dividends, or interest are automatically transferred to Bank Sweeps account. In my case the difference is .50% in the Bank account and 1.84% in MVRXX. The move to the MM fund is not automatic, I must call the broker and direct him to do so.
Regards,
Ted
https://www.morganstanley.com/wealth-investmentstrategies/ratemonitor

larryB

@ted. " Call the broker and direct him to do so ." REALLY? What year is this? 1988?

Ted

@larryB: I consider the additional interest of 1.34% well worth the call. You don't ? Why would you post " " REALLY? What year is this? 1988?" which is silly and childish. Grow up!!!
Regards,
Ted

larryB

@ted. Sensitive today. I guess most trumpians are feeling a bit embarrassed today. The shade is coming home to roost. just was shocked that people still call a broker for a MM transaction. Just seems so quaint, so last century.

bee

@Ted makes a very good point. Brokerage houses do not choose cash positions for their investors. Usually these cash positions are held in non-interest bearing products. Also, when an investor sells out of a position, the settlement position often is a low interest bearing choice made by the brokerage house. You often have to select a "money market mutual fund" that has an ER (expense ratio), but in today's raising interest rate environment is handsomely covered with interest to spare. Go handsomely @Ted!

larryB

Guys, that is not the point.the point is nowadays that sort of transaction is done using a smart phone, a desk top, a laptop,, a Chromebook....... calling a broker,,,,my dad does that,,,,,he is 94.

bee

@larryB...go easy...

Charles W. Kingsfield Jr.: Mr. Hart, here is a dime. Take it, call your mother, and tell her there is serious doubt about you ever becoming a lawyer.

James T. Hart: [pause, as he is leaving the room] You... are a son of a bitch, Kingfield!

Charles W. Kingsfield Jr.: Mr. Hart! That is the most intelligent thing you've said today. You may take your seat.

VintageFreak

larryB said:

Guys, that is not the point.the point is nowadays that sort of transaction is done using a smart phone, a desk top, a laptop,, a Chromebook....... calling a broker,,,,my dad does that,,,,,he is 94.

Do you have account with Merrill Lynch? You HAVE to call. I'm going to have to because they F'ed up one of my trades.

There are no smart people at ML. There is no link to contact online using chat or email. Website actually says "Call this number".

And someone gave it best broker award last year I think. Absolute Nonsense.

larryB

My dad had an account at ML too.

davidrmoran

>> Do you have account with Merrill Lynch? You HAVE to call.

?? one can do a lot of stuff online, including all trading

did I miss a particular transaction or operation?

johnN

..

catch22

@johnN
What do you mean with, "I went to my local union and they gave me a nudge different compared to other banks... " ?
This thread is about cash inside of an investment/brokerage account, yes?

MikeM

from the article:

Some brokers place your cash into money market funds, often their proprietary, in-house funds. This allows the broker to earn fees from your idle cash. Some brokers “sweep” your cash from the brokerage into a bank, typically a bank they also own (an “affiliated” bank).

This is exactly what Schwab does with their Intelligent Portfolio's (robos). It is how they get away with not charging any "fee" for their robo-portfolio series. I haven't thought much about this up until now. I have been fine with it as MM and CD interest was very low, but as rates go up... I have to give that some thought. My robo has 10% in Schwab-cash contributing little to nothing for the portfolio.

I do purchase CD's and MM 'funds' from Schwab with my self managed cash. I believe the MM rate is about 1.89% and I just bought a 1 year CD (Morgan Stanley is the holder) paying 2.35% .

msf

davidrmoran said:

>> Do you have account with Merrill Lynch? You HAVE to call.

?? one can do a lot of stuff online, including all trading

did I miss a particular transaction or operation?

Apparently you did miss the memo:

Merrill Lynch said it will stop automatically sweeping customers’ uninvested cash into money market funds starting in September and instead move it into lower-yielding deposits at affiliated banks. Brokers will still be able to manually move the funds into money market accounts.”

https://www.americanbanker.com/morning-scan/jpm-breaks-free-merrill-to-sweep-uninvested-funds-away-from-mmfs

That's part of a summary of Jason Zweig's Aug 21 WSJ article, Merrill Lynch Joins Brigade Downplaying Money-Market Mutual Funds:

Merrill’s brokers will still be able to place their customers’ cash in higher-yielding money-market funds, but only by purchasing them manually.

https://www.wsj.com/articles/merrill-lynch-joins-brigade-downplaying-money-market-mutual-funds-1534880179 (google search or subscription required)

Vanguard is currently paying 1.9% (7 day yield) on VMFXX, which is the settlement account for VBS accounts. So unlike most brokerages, there isn't the need to move money to a higher yielding MMF. Though VMMXX is yielding about 1/4% more.
https://investor.vanguard.com/mutual-funds/list?filterAllAssetClasses=false&filterMoneyMarket=true&filterFiftyThousandAndUp=true&filterLowCostInvestor=true#/mutual-funds/asset-class/month-end-returns

At Fidelity, the default core account is SPAXX, currently yielding 1.53%. You can boost that by about 1/3% by moving the money into SPRXX/FZDXX. While you have to explicitly move the money into the higher yielding fund, Fidelity will automatically pull from that fund to cover purchases/withdrawals if there isn't enough in your core account.
https://www.fidelity.com/fund-screener/evaluator.shtml#!&ft=MM_all&mgdBy=F&ntf=Y&expand=$FundType&tab=ic

Chuck doesn't give you the option of a MMF for your settlement account:

Schwab no longer allows new enrollments into sweep money market funds (MMFs), with the exception of international accounts, Schwab Managed Accounts, Schwab Charitable accounts, and certain existing ERISA plans. Existing accounts with sweep MMFs will be migrated to the Bank Sweep feature over a period of years

So you have to move the money yourself into one of its "purchased" MMFs to get a decent yield:
https://www.schwab.com/public/schwab/investing/accounts_products/investment/money_markets_funds/purchased_money_funds

Getting back to Merrill Lynch. Here's their list of bank deposit accounts and MMFs available as "Cash management solutions". (When I download it, it gives me a date of 8/21/18).
https://olui2.fs.ml.com/Publish/Content/application/pdf/GWMOL/ICCRateSheet.pdf

As it notes, not all funds are available for all Merrill investors. Some of the "tickers" don't end in XX, and the Merrill Edge quote box doesn't recognize them. While the trade form does recognize standard symbols like GOFXX, when I enter one of them I get the message: "The symbol you entered is invalid. Please try again."

It looks like the only funds on Merrill's list that would be available to someone not investing through a managed account (that might be able to get an institutional share class) are the Blackrock Money Funds (BBIF). Tier 1 is paying 0.53%. Still I can't see how to buy that without calling a broker. Are there any MMFs you can buy online at Merrill Lynch or Merrill Edge?
https://www.blackrock.com/cash/en-us/products/282859/bbif-money-fund-1-usd

This exercise is confirming my expectations: Vanguard lowest cost/highest yield, Fidelity good yield, a bit easier to use, Schwab sticking you with low paying bank sweeps but offering options; Merrill Lynch sticking you with low paying sweeps and hiding alternatives if they even exist.

davidrmoran

nondreck

u should publish good summary elsewhere too