Where To Stash Your Cash

johnN

Where To Stash Your Cash
Oct. 11, 2017 8:59 AMGM, VFSUX, VMFXX
Summary
Investors have been bullish on equities with a couple of corrections along the way since March 2009.
Equities are starting to look a bit frothy.
In the past, investors might have started moving money out of equities and into bonds at this point.
The driver for the 8.5 year bull market in equities has also driven up the price of bonds resulting in near historically low yields.


https://www.google.com/amp/s/seekingalpha.com/amp/article/4112870-where-to-stash-your-cash


Couple good ideas revisited
Short bond funds/ultrashort bond funds/mm/ cd yields/

Vanguard Short Term Investment Grade Fund (NYSE: VFSUX)
Vanguard Short Term Tax Exempt Fund (NYSE: VWSUX)
Vanguard Ultra Short Term Bond Fund (NYSE: VUSFX)
Vanguard Federal Money Market Fund (NYSE: VMFXX)


We do use preferred etf PFF and preferred BAC vehicles


Regards

MikeM

Not a recommendation to buy, but I put a good chunk of my cash in MNWAX. Little volatility and I hope to make in the 4% range with it. It's classified long/short but I see it as market neutral with minimal volatility. Steady-Eddie in rising and falling markets. Maybe no different than a short or ultra short bond fund, but if bonds make you nervous, as they do me, worth looking at.

Derf

@MikeM: I'll check it out.
Thanks Derf
I'll pass, & add that Chuck showed SPEDX (load waved) & RLSFX. If you like low ER forget these two.

Old_Skeet

@Derf, Interesting pick in SPEDX. Thinking I'll cut some from SPECX into SPEDX through a nav transfer. This should put me somewhere around 50% in SPECX, 25% in SPEDX and 25% in AOFAX within the Alger family of funds. I've got to be careful moving out of SPECX as I've built up sizeable unrealized capital gains in SPECX. In doing a nav transfer I avoid commissions but tax wise this counts as a sale and the tax man will want his cut.

Again, a good pick in SPEDX as I am really thinking hard about moving some money into it especially since, from my perspective, equities are overbought and it can short. I'd most likely hold SPEDX in my niche fund sleeve found in the growth area of my portfolio.

As for my cash I have it split among four money market funds. They are AMAXX, TTOXX, TBIXX & PCOXX. Currently, their year to date returns are 0.27%, 0.34%, 0.47% & 0.52% respectively. When I reduced my cash allocation from 20% to 15% in my portfolio, a while back, I rolled this money into a couple bond funds (MIAQX, LBNDX & FLAAX) since cash yields are paying next to nothing and these bond funds have current yields of about 4.2%, 4.0% and tax free 3.2% respectively. This move became my chosen option to counter low cash yields and raised my income area allocation from 40% to 45%.

Over time, I'll let my portfolio's income generation restore my cash position back to the neutral position of 20%. I'm thinking by year end I'll be back close to the 20% cash allocation as I take all income distributions including year end mutual fund capital gain ditributions in cash. At year end I'll decide how to proceed with respect to the rebalancing my portfolio.

I'm sure there is more than one way to deal with low cash yields. As investors, we have to decide which way is best for each of us to proceed knowing there is no one right (or wrong) way to move as there are no doubt many options that will find success.

Thanks again Derf for bringing SPEDX to the board's attention as I am no longer a student of new fund study although I do follow the markets and for the most part run with what I have establised through my many years of investing.

MikeM

All about what you are using it for, @Derf. I would use neither of the funds you mentioned as a store for cash which was my intent and the premise of the posted article. Both SPEDX and RLSFX dropped 13-14% during the initial Covid drop. Not a "cash stash" in my book. As mentioned, for me MNWAX is just a "safe" fund to plod along at a 3-4% /year pace with very little volatility. Not for everyone I'm sure.

FD1000

Any fund that dropped more than 2-3% YTD is not cash sub and why I like ICSH, JPST. These too had much lower volatility in other years.

msf

There's a whole spectrum of risk/reward in the "cash-ish" arena. If one is looking for something one can draw from daily, that's called a checking account. One can fudge that by using a savings account (generally limited to 6 withdrawals per month), but that's about all.

Moving up from there, one might be willing to tolerate a small loss and/or hold the investment a little longer to ride out the blips. If you're willing to tolerate only small losses, you'd likely prefer a fund with a small max drawdown. That might be more to your liking if you anticipated drawing on this asset every few months. OTOH, if your horizon is a bit longer you might be more forgiving of the blips but more insistent on a generally smooth ride.

This fund seems to fall into that latter camp. It had nearly a 5% drop between March 14 and March 23. See M* graph. So it can lose a year's worth of returns in a week. Still, over the longer term it does seem to plod along, just as @MikeM describes.

A more traditional fund that I've been looking at, FJRLX - on the risky end of limited term bond funds - has similar volatility, a somewhat worse dip (6.5% between March 8 and March 23), and a poorer five year/three year performance.

Which makes MNWAX an interesting, if unusual, candidate for holding longer term cash.

davfor

FD1000 said:

Any fund that dropped more than 2-3% YTD is not cash sub and why I like ICSH, JPST. These too had much lower volatility in other years.

Agree. RPHYX also makes sense to me....

BenWP

IIRC, @MikeM, @hank, and I have put what was stagnant cash to use in TMSRX. I would be happy with 3% return on this money as that would represent a big improvement over the MMF where it was parked before.

FD1000

The cash-sub thing come 2-3 times weekly. Cash-sub is a fund with very low volatility for years except a short hiccup this year in March. If you raised the volatility then you have many regular bond funds.
So, I would look at funds like ICSH, JPST,MINT, RPHYX(nice davfor)

BTW, I hardly ever use cash-sub funds or even short term bond funds. Either I'm in all the way with mostly bond funds or in a rare occasion I'm out in a real MM fund. When a black swan shows up I don't want to play at all.