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Rbrt said:I haven’t read everything above but I say cash is form of bonds.
I haven’t read everything above but I say cash is form of bonds.
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Schwab has a number of mutual funds that they offer for cash. SWVXX is their default fund for the cash you accumulate, when you sell a fund focused on equities, bonds, and other volatile assets. However, Schwab has several alternative funds that you can also select that have more security, such as government guaranteed assets, which many of us, chose at the height of 2020 crash selling options. It is a form of investing, but more based on what level of security you want, and type of asset you most trust. If you had a large amount of cash, you could get a higher amount of interest with some of the alternative options to their default account. When I was with Fidelity, you had similar options/alternatives, that Fidelity allowed for cash accounts. You are not going to make any meaningful total return with such funds, but sometimes investing involves putting your cash in funds that rarely, if ever, lose money, and have a NAV that stays the same under all types of market conditions.
In developing a personal portfolio allocation model and a modus operandi you have license to call the internal components whatever makes sense to you. However, if you were running a mutual fund or bank and didn’t differentiate between cash and bonds in your financial statements it could land you in trouble.
I agree the distinction gets a bit clouded. Morningstar shines some light on it:
“Cash investments are very short-term debt obligations that are often FDIC-insured; CDs, online savings accounts, checking accounts and bank-offered money accounts, and money market mutual funds are all versions of cash instruments. (Of the aforementioned investments, only money market mutual funds aren't FDIC-insured.)” https://www.morningstar.com/articles/946730/cash-versus-bond-fund-which-is-better
@Robert’s method of lumping all fixed income together under one umbrella is one good way to do it. Within that sleeve he places minimums on the percentages of fixed income that must be held in cash.