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I recently reopend my investment cash sleeve within the cash area of my portfolio with the purchase of a 24 month cd, Bank of Commerce, that has a yield of 0.85% along with the option of two step ups (my choosing). This is nothing to really write about ... but, it is where I have started to stash some of my cash in the rebuiling of my cd ladder. At one time, I had a sixteen position CD Ladder with cds maturing every 90 days over a four year span. It had an average yield in the 4.5% range.
I don't plan to sell assets in the rebuilding of my cd ladder; however, I do plan, in good time, to split my cash with 10% being in the demand cash sleeve and 10% bing in the investment cash sleeve all of which will be time deposits (CDs).
In the near term I will continue to make special "spiff" investment positions form time-to-time thus making some of my demand cash productive through utilizing some short term investment strategies. I am awaiting a retreat of S&P 500 Index to the 1565/1575 range before opening any new "spiff" positions. I recently saw a report, that my broker provided form S&P Capital IQ, that currently targets the Index towards 1800 by year end. Indeed good news if this comes to be.
Within, the fixed income sleeve of my portfolio I continue to operate with three short term fixed income funds LALDX (yield 3.46%), THIFX (yield 2.46%), and ITAAX (yield 2.82%) along with two multi sector income funds NEFZX (yield 4.96%) and LBNDX (yield 5.20%). I plan to add a third income fund in the near term. I currently have under review two multi sector income funds TSIAX and EVBAX along with a high yield fund FAHDX all which hold a limited amount equity exposure.
When interest rates normalize, I most likely will swap out the short term fixed funds for intermediate income and/or long term income funds.
Thus far this year all twelve of my investment sleeves within my portfolio have produced positive returns.
Paying 0.57% a year in expenses to get "safe yield" doesn't make a lot of sense to me these days. That is a huge portion of the total expected yield.
I'd rather own an index fund, perhaps SPY or DIV, for the portion they invest in stocks then buy CDs, savings accounts and iBonds for the portion invested in "100% risk free assets" with FDIC and similar insurance.
From http://finance.yahoo.com/q/pm?s=FPNIX+Performance Performance Overview Morningstar Return Rating: 2.00 Year-to-Date Return: 0.57% 5-Year Average Return: 2.70% Number of Years Up: 41 Number of Years Down: 2 Best 1 Yr Total Return (2001-12-31): 12.33% Worst 1 Yr Total Return (2005-12-31): 1.57% Best 3-Yr Total Return (N/A): 8.67% Worst 3-Yr Total Return (N/A): 2.53%
I earned over 1% from my SPY position YTD (currently paying about 2.2%/yr) and I have money in FDIC CDs and savings accounts paying up to 1.1% CD Rate Survey and Best Savings Account Rate Survey .
Sadly, it is hard to get the higher rates for money in IRAs at brokerage accounts since the high rates are usually to get you to switch, but I'm still finding 0.5% to 0.6% for 1 yr CDs in my broker accounts.
Reply to @Rocky: With 2 down years out of 43, wouldn't you show a negative return in the worst year space? Checked link & that confirms 1.57%. Have a nice day, Derf
Reply to @Hrux: Different funds, IMHO with different roles. Here's the conclusion of a post I wrote in another thread (on FPA going noload):
New Income can serve as a good conservative bond fund. River Park can serve as a cash+ fund. Different objectives, different portfolios, different ways of investing. Each has its role.
Am I missing something? I associate "stashing cash" with a taxable account. I am not sure FPNIX would be a great place to stash your cash because of the interest income it would throwing off.
Reply to @Hogan: Traditionally, tax-free accounts (for cash, typically tax free MMFs) have been good for people in the higher tax brackets - you'd get about 80-85% of the yield, so if you were above the 15% bracket, these would be better.
The problem these days is that to get any return at all, you have to go out about 10 years in munis, and that's no longer "cash", but bonds that put principal at risk. Muni (ultra)short term bond funds yield nothing, e.g. SMUAX (Wells Fargo, formerly Strong, Muni Advantage Investor Class) SEC yield of 0.04%, ATOAX (Alpine Ultra Short)'s is 0.22%. Even Vanguard, with is much vaunted low expense advantage, can only eke out a 0.39% SEC yield with its Short Term Tax-Exempt Fund Investor Class VWSTX.
It's easy to find a government-insured account yielding more than double, so after taxes, you still come out better. Ally Bank (0.84%), Doral Bank (0.95%), etc.
So that sets the floor. I think people here are looking to best the FDIC/NCUA-insured accounts, and if they're taxable, it doesn't matter. Still beats the munis, post-tax.
In the past I have used VWSTX and SMUAX, mentioned above. Recently looked at PTHDX, BBBMX and FMLCX (which is tax exempt.) All 5 of these lost between .3 and .6% in the last month and, depending on where you buy them, some of them have a fee or high minimums. Still the others look worse. All have durations under 2 years, some (e.g. BBBMX) hedge to keep the duration down.
We're talking about cash or cash-like vehicles. There isn't (as far as I can see) a single short term muni CEF. In addition, leverage increases the volatility of the market price: - With over 100% long term bond exposure, the NAV drops faster than a non-leveraged fund as interest rates rise - As the cost of leverage (short term rates) increases, fund yields drop, making the fund increasingly less attractive and increasing its market discount (depressing its market price).
This is an old article, but fundamental concepts endure. At least until they don't - the article ends with the suggestion that auction rate muni securities could be used as a tax-free MMF alternative; 2008 showed how wrong that was. See, e.g. http://www.novackmacey.com/the-collapse-of-the-auction-rate-securities-market/
Comments
I recently reopend my investment cash sleeve within the cash area of my portfolio with the purchase of a 24 month cd, Bank of Commerce, that has a yield of 0.85% along with the option of two step ups (my choosing). This is nothing to really write about ... but, it is where I have started to stash some of my cash in the rebuiling of my cd ladder. At one time, I had a sixteen position CD Ladder with cds maturing every 90 days over a four year span. It had an average yield in the 4.5% range.
I don't plan to sell assets in the rebuilding of my cd ladder; however, I do plan, in good time, to split my cash with 10% being in the demand cash sleeve and 10% bing in the investment cash sleeve all of which will be time deposits (CDs).
In the near term I will continue to make special "spiff" investment positions form time-to-time thus making some of my demand cash productive through utilizing some short term investment strategies. I am awaiting a retreat of S&P 500 Index to the 1565/1575 range before opening any new "spiff" positions. I recently saw a report, that my broker provided form S&P Capital IQ, that currently targets the Index towards 1800 by year end. Indeed good news if this comes to be.
Within, the fixed income sleeve of my portfolio I continue to operate with three short term fixed income funds LALDX (yield 3.46%), THIFX (yield 2.46%), and ITAAX (yield 2.82%) along with two multi sector income funds NEFZX (yield 4.96%) and LBNDX (yield 5.20%). I plan to add a third income fund in the near term. I currently have under review two multi sector income funds TSIAX and EVBAX along with a high yield fund FAHDX all which hold a limited amount equity exposure.
When interest rates normalize, I most likely will swap out the short term fixed funds for intermediate income and/or long term income funds.
Thus far this year all twelve of my investment sleeves within my portfolio have produced positive returns.
I wish all ... "Good Investing."
Skeeter
I'd rather own an index fund, perhaps SPY or DIV, for the portion they invest in stocks then buy CDs, savings accounts and iBonds for the portion invested in "100% risk free assets" with FDIC and similar insurance.
From http://finance.yahoo.com/q/pm?s=FPNIX+Performance
Performance Overview
Morningstar Return Rating: 2.00
Year-to-Date Return: 0.57%
5-Year Average Return: 2.70%
Number of Years Up: 41
Number of Years Down: 2
Best 1 Yr Total Return (2001-12-31): 12.33%
Worst 1 Yr Total Return (2005-12-31): 1.57%
Best 3-Yr Total Return (N/A): 8.67%
Worst 3-Yr Total Return (N/A): 2.53%
I earned over 1% from my SPY position YTD (currently paying about 2.2%/yr) and I have money in FDIC CDs and savings accounts paying up to 1.1% CD Rate Survey and Best Savings Account Rate Survey .
Sadly, it is hard to get the higher rates for money in IRAs at brokerage accounts since the high rates are usually to get you to switch, but I'm still finding 0.5% to 0.6% for 1 yr CDs in my broker accounts.
Have a nice day, Derf
Different funds, IMHO with different roles. Here's the conclusion of a post I wrote in another thread (on FPA going noload):
Traditionally, tax-free accounts (for cash, typically tax free MMFs) have been good for people in the higher tax brackets - you'd get about 80-85% of the yield, so if you were above the 15% bracket, these would be better.
The problem these days is that to get any return at all, you have to go out about 10 years in munis, and that's no longer "cash", but bonds that put principal at risk. Muni (ultra)short term bond funds yield nothing, e.g. SMUAX (Wells Fargo, formerly Strong, Muni Advantage Investor Class) SEC yield of 0.04%, ATOAX (Alpine Ultra Short)'s is 0.22%. Even Vanguard, with is much vaunted low expense advantage, can only eke out a 0.39% SEC yield with its Short Term Tax-Exempt Fund Investor Class VWSTX.
It's easy to find a government-insured account yielding more than double, so after taxes, you still come out better. Ally Bank (0.84%), Doral Bank (0.95%), etc.
So that sets the floor. I think people here are looking to best the FDIC/NCUA-insured accounts, and if they're taxable, it doesn't matter. Still beats the munis, post-tax.
We're talking about cash or cash-like vehicles. There isn't (as far as I can see) a single short term muni CEF. In addition, leverage increases the volatility of the market price:
- With over 100% long term bond exposure, the NAV drops faster than a non-leveraged fund as interest rates rise
- As the cost of leverage (short term rates) increases, fund yields drop, making the fund increasingly less attractive and increasing its market discount (depressing its market price).
From AAII: "If interest rates rise sharply, leveraged muni investors face a triple whammy - reduced dividends, falling NAVs, and deepening discounts."
http://www.aaii.com/journal/article/fixed-income-investing-analyzing-closed-end-municipal-bond-funds.
This is an old article, but fundamental concepts endure. At least until they don't - the article ends with the suggestion that auction rate muni securities could be used as a tax-free MMF alternative; 2008 showed how wrong that was. See, e.g. http://www.novackmacey.com/the-collapse-of-the-auction-rate-securities-market/