Options for liquidity beyond cash …. ?

Comments

• fundly

  May 26

  Are you in a state with tax free treasury dividends? If so then I would look at VUSXX, GABXX. FRSXX and other similiars. If not ,other ultra short term funds to look at are ICSH, PULS in addition to TBUX. They each have different durations and credit qualities for which you would have to determine is best for your situation. I use USFR, GABXX, TBUX and PULS in the ultrashort sleeve. NEAR which I also own is of longer duration , ie 1.97 years and will of course be more volatile than the others. Good luck with your choice or choices.
• Observant1

  May 26 edited May 26

  I considered a dedicated CLO fund in recent years.
  A post with my thoughts is linked below.
  https://www.mutualfundobserver.com/discuss/discussion/comment/191039/#Comment_191039
• hank

  May 26 edited May 26

  Thanks for the thoughts @fundly. It’s all IRA money. So taxes are little concern. Reaching for yield in the Traditional IRA is an easy choice because I rarely do any trading in it. That’s where I currently have NEAR. But “cash” in the larger (and more risk oriented) Roth, on the other hand, might be needed / put to use if equities suddenly fell out of bed, as they did in March & April - or if some unexpected need arose. So reaching for yield in the Roth is more problematic.
  
  Really just interested in how others handle this. Some, I’m sure, want the safety of government backed paper. In fact, James Stack consistently recommends to his followers that their non-invested money be held in money market funds or T-Bills. And the guy knows a lot.
• larryB

  May 26

  @Hank. For reasons of preservation of capital I live in the world between TRBUXX and common old Money Market Funds. For the last several years my Schwab MM has been more than satisfactory. I became overly enthusiastic about CD’s yielding above 5%. Those days are over but going forward it will depend on the direction of interest rates. I don’t need the income but I value preservation. And as the Bogleheads say,,, take your risk with equity stuff.
• fundly

  May 27

  On a bell curve invest money from least risk to greater risk in as many funds as you wish to manage in equal amounts. In this way you eke out a greater return without being greedy and taking on greater .risk depending on your situation. So in my above post USFR and GABXX would balance out PULS, then TBUX and finally NEAR. This is how I do it and sleep well at night.
• hank

  May 27 edited May 27

  Problem solved. Split most of it between NEAR & TBUX. Kept about 20% in SPAAX.
  Thanks all.
• msf

  May 27

  The approach depends on one's objectives. For day-to-day, checking account type usage (or hank's trading), IMHO only a MMF, like GABXX (7 day yield 4.30%) or VUSXX (7 day yield 4.23%), are a good match. I'm assuming a "checking usage" occurs in a taxable account where pure treasury holdings (state exempt) add value. And like bank accounts, these will not lose money (unless the underlying treasuries default).
  
  What to use beyond that depends on one's objective(s). If one is looking at making periodic payments within the next few months (e.g. property taxes, mortgage payments, insurance premiums, income tax estimates, etc.) then buying individual treasuries maturing at the right time look good. The treasury yield curve is flat out to six months (around 4.35%)
  
  If one is looking at opportunistically replenishing one's "checking" account, then looking at funds with durations up to two years (NEAR being at the outer fringe) makes sense. I'd focus more on drawdown recovery times than volatility risk. Alternatively, one might want to optimize risk/reward.
  
  I asked Portfolio Visualizer to do that with eight funds. Four of those were mentioned here: USFR, PULS, TBUX, NEAR. Since PV doesn't optimize cash, I substituted ICSH for a MMF. For the other three I added two floating rate non-treasury funds, FFRHX (bank loan, junk) and FLRN (IG). Finally I added CBUDX which has gotten some mention on MFO.
  
  PV reports that one optimizes reward/risk generally with a mix of CBUDX and FFRHX - the more risk one is willing to take, the more one adds FFRHX. It's only at the low end of risk (very low portfolio volatility) that one emphasizes USFR. And there's a narrow range of risks (volatility) of risk where ~10% in PULS helps. If it makes you feel more comfortable, an equal allocation of all eight of these funds is not far off the efficient frontier, so that works too.
  
  If anyone is wondering why I didn't include RPHIX, it's because the results aren't that much different from using CBUDX. Substituting RPHIX for CBUDX, the mixture graph (which funds for what volatility) is fairly unchanged. Though the max Sharpe ratio is a higher as are the returns with RPHIX.
  
  
• hank

  May 27 edited May 27

  Funny you should mention GABXX @msf. I was looking at another of their funds, GABCX, last evening and when I ran it on Fidelity’s site I learned they don’t offer it, nor do they offer GABXX. Not a huge fan of Gabelli, but have owned / do own 1 or 2 of their CEFs.
  
  You make excellent points. Complicating things is that I’ve stashed about a year’s anticipated IRA distributions in SPAXX. A slug of that is anticipated for infrastructure. Absolutely want that $$ in a money market fund. Just don’t want to actually “distribute” it until needed. So my question hinged more on cash as a longer term portfolio position, equal in weight to several other holdings (with occasional rebalancing back to neutral).
  
  Re trading - I lost a bit when I sold JAAA in late April in order to buy equities and other risk assets.. JAAA dropped then (but much less than equities). So no! Don’t rely on it for trading needs. (I no longer own it.) I also lost on PRIHX which I loaded up on in my taxable account roughly 5-6 years ago. It had appeared so “safe” based on past performance. Yet when I finally sold out 3 or 4 years later it was worth less then at purchase.
  
  Oh. Excuse me. I realize you’re not supposed to confess past mistakes here!
  
  
• Tarwheel

  May 27

  I’m keeping a portion of my cash in FLDB, Fidelity’s ultrashort term ETF. It trades instantly, so I can buy and sell as easily as a money market. Yields are about 4.6% right now, compared to 3.9% for Fidelity money markets. It doesn’t have a long history but has performed well since it opened about two years ago.