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The Best Places to Hold Short-Term Cash

johnNjohnN
in The OT Bullpen
The Best Places to Hold Short-Term Cash

https://money.usnews.com/investing/investing-101/slideshows/7-best-places-to-hold-short-term-cash?src=usn_invested_nl


Jan. 28, 2019

Short-term investments may be a good solution for those looking to remain liquid or stashing cash in an emergency fund. With the Federal Reserve raising interest rates, rates on securities that mature anywhere from several days to a few years are boasting some of the highest yields in years.

Todd Rosenbluth, senior director of exchange-traded funds and mutual fund research at CFRA, says investors have started to purchase ETFs and mutual funds with shorter durations and minimal interest rate sensitivity. Experts say these investments don’t decline much while interest rates rise, and investors benefit from the higher yield.

Here are a few short-term options with high returns.

1. Treasury bills. Mike Bailey, director of research at FBB Capital Partners, recommends U.S. Treasury bills for investors who want to tie up cash for just a month or two. These maturities can range in duration from a few days to 52 weeks, with no fees and small commissions. Treasury bills can be purchased from a financial advisor, bank broker or directly from the government at TreasuryDirect.gov. “If you have the scale and the ability, it’s your best option,” Bailey says.

The current rate for a one-month Treasury bill is 2.42 percent. An alternative is iShares Short Treasury Bond Fund ETF (ticker: SHV). It has an expense ratio of 0.15 percent and a 1.66 percent yield.

2. Short-duration Treasury bonds. For investors willing to ride out the interest rate curve for a higher yield while remaining in safe U.S. Treasurys, Rosenbluth suggests iShares 1-3 Year Treasury Bond ETF (SHY).

This fund has a weighted average maturity of 1.9 years and holds 69 securities with maturities between one and three years. It has an expense ratio of 0.15 percent and a yield of 1.72 percent. “That yield is pretty impressive given that it doesn't take on much interest rate risk or much credit risk,” he says. – Debbie Carlson
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