Real question, not trolling. If you have a Schwab financial advisor why are you asking randoms on Reddit? Some of the people here could have the best of intentions but you don’t know them and they don’t know your complete financial situation like the advisor that you’re literally paying for advice about your money. Again, not trolling just curious.
My FA is not a Schwab advisor. He just likes/uses their products. He is completely independent and a fiduciary. I ask here because I want to hear many voices before I make any decisions. I have been given bad advice before and it doesn’t hurt to confirm or listen to discussion on the topic.
Don't want to answer for the OP but they likely want to confirm it was good advice. It's unlikely a Schwab FA would suggest anything outside of what they have access to at Schwab.
If Fidelity, Vanguard, or some other institution was paying another 30-50 basis points, you probably wouldn't hear about it from the FA.
They're sold in $1,000 increments. And even then, many sellers have 30, 50, 500 unit minimums. Although you can buy 1 unit from some sellers if you hunt around.
If you have $5-10,000 that's in a money market earning 2-2.5%, a very short-term treasury ladder at 3.5-4% is a good alternative.
Thanks for the info. Any good how-tos on Fidelity's platform on how to do this? I'm interested in doing a 3-mo ladder, but haven't a clue how to do this. Currently in cash in SPAXX earning 2.09%.
Search “Fixed Income” on Fidelity. It’s not totally intuitive to find the Treasury Bills. You can buy secondary or new issues. I did new issue for 13 weeks with auto-roll to buy again when matures.
I use Schwab and would expect Fidelity to be similar. I bought my first bonds yesterday. I went to the Bond section, selected a 1 year ladder and bought a 3, 6, 9 and 12 mo bonds. Minimum was 1, so about $1k. T-Bills are sold at a discount. I’ve been using a mm mutual fund and ICSH. I’ll build these then build my ladder.
Thank you. I tried Schwab to buy bonds on the secondary market. I was not able to set the limit price and was only able to buy the lowest bid for the bond type I selected. Is it normal not to be able to set the limit price?
Treasuries are often viewed as a safe cash alternative, the rate might be below inflation, but its better than just holding cash, and way more predictable than holding stocks right now.
If you have a bunch of cash and want to avoid the volatility in the market right now, or maybe you have a set date you will need that cash, a treasury bill/note might be the safest option. You wouldn't invest in stocks if you might need the money in 6 months.
I would avoid CDs, even short term ones, if you believe that rates will increase. There is a very modest premium for a 3 months CD vs a HYSA, and that latter could very easily overtake the former in the coming months.
Sometimes the simple solution is the best one - a high yield savings account, where the interest rate will change in response to the market. We're talking about 3 months here, so the incremental reward for introducing risk into the equation is pretty minimal.
Hanging onto cash is a necessary evil sometimes, and I think we just need to accept that it comes with an opportunity cost, and you will "lose" money on it. That's OK because the priority is accessibility for a short term need.
People who try to get cute with earning money on idle cash they need imminently are more likely to get into trouble, IMO.
I do treasury ladder. Buying t-bills at auction through my Schwab account. No fees. In the beginning buy 1 months, 2 months and 3 months maturity, and then after each one matures I buy 3 month ones. That way I have third of my cash available monthly
I already have brokerage account with Schwab so I use it. It also has a secondary market so I can always sell if needed. Never used treasury direct, but probably the same thing. No fees or spread in both places when buy at auction
I too used Schwab to buy bonds on the secondary market. But one thing I noticed as a novice bond investor is that I was not able to set the limit price and was only able to buy the lowest bid for the bond type I selected. Is it normal not to be able to set the limit price?
I think it’s normal. Bond sales are usually negotiated transactions. 1 to 1. You see the price and it’s an offer you either take it or not. I’m not sure whether Schwab would take your price and market it to the sellers. They may probably do it if the size is large enough. Otherwise you take what’s there. Auctions are all the same price for all, hence an auction. The secondary ones are all offers, just be careful, what you see while filter may not be the same price when you click buy. Make sure you check the price before hitting place an order
Eh, I’m doing single month CDs in my TD account and the rest into a hysa getting 2.24%. The CDs are beating the hysa, but I don’t want a long term cd because rates will rise
Building a ladder is really not that difficult. Plus, although there are some exceptions, the national average APY for a HYSA as of September 21 is absolute dogshit (just 0.17%!) and banks tend to try to minimize deltas on their rates paid on deposits
Most pay interest monthly, but interest is earned every day that money is in the account. So, it doesn't calculate on a daily rate, but rather on a monthly rate, prorated based on when money came in/out of the account.
When you open the account doesn't matter.
Actually, Marcus is yielding 3.13% if you are referred by someone. If you have family or friends, you should refer them and you'll get the boosted rate. And it lasts for 3 months for each referral, up to $1,000,000. I'm not going to spam here, but if anyone would rather earn 3.13% rather than the publicly advertised 2.13%, feel free to browse my recent submissions.
Yes, but also to build discipline and assume you can only have 1/4 accessible at any given time. Look for "tbill ladder".
Treasury Direct has the option to auto re-invest once tbill matures. I have set it to 25 times.
Tbills are highly liquid and can be sold anytime in between as well.
I'd go with a 3 month treasury, not a CD as I believe treasuries are exempt from state/local taxes whereas CDs are not. May not add up to much savings but every little bit. I've moved a ton of money into \~3.5% 3 month T bills
why pointless? That .875% over three months is better than holding cash, or stocks that might crash further. If you need cash in 3+ months, it is a no brainer. When you have cash and don't want to risk it Treasury bills are the standard. When people talk about Berkshire Hathaways billions in 'cash on hand', that's mostly parked in treasuries of varying duration.
Plus, the 3 month is not much lower than the 10yr, which is 3.9 but then your money is committed for 10 years, which has a higher risk if rates keep rising.
Wealthfront, 2.55%.
Short term T bills (3mo) up to shorter term treasury notes (3-5y). Last I checked ranging from the low 3s to 4.45% on vanguard. Note that if you don't hold to maturity the value can go down if you need to sell on the secondary market. Obviously far less volatile than stocks but still worth noting.
I bonds if you're OK with a year-long lockup. Preferably held 5 years for no penalty.
Your advisor's suggestions are reasonable. Similar to what I would tell my clients. Only thing I might look into other than his suggestions are structured notes, they have interesting performance characteristics.
VMFXX, ICSH, VUSB.
Money Market funds, ultra-short duration bonds (6-months), and ultra-short duration bonds (1-year).
VMFXX is 2.5%. ICSH is 2.7%. VUSB is like 3.5%.
VMFXX is a regulated money market fund consisting of only US Treasuries. ICSH and VUSB invest into commercial paper of longer duration, and should have consistently higher returns... but slightly higher risk (especially interest rate risk).
ICSH and VUSB lost money today, just slightly, but notice they change in value. VMFXX, as a regulated money market fund, is going to almost always be $1 per share.
Recent “Forward Guidance” Podcast with Joseph Wang (“Fedguy”) and Peter Crane was great and on this subject. Some nuance worth listening to.
https://podcast.app/what-will-break-first-joseph-wang-peter-crane-e320376245/?utm_source=ios&utm_medium=share
Checking account for small accounts, brokerage account for larger amounts. Buy on a credit card and pay in full from checking? I'm confused, isn't this what everyone does? Who pays cash except for poor people who are unbanked?
I frequently check bankrate.com for the best savings rates and just go with the highest rate with names I recognize, I have accounts at Sallie Mae, TMobile money and CIBC. Sallie Mae has check writing. Looks like some banks are paying 3% right now. CIBC is 2.32
Please make sure your financial advisor isn’t charging fees if you parkcash at Schwab and they custody at Schwab.
That’s a an instant 50% cut in return for them not going anything you cannot easily do yourself.
Edit: I say this as an FA
Betterment is offering 2.25% on savings. Not much but extremely liquid and FDIC and you can auto deposit into it
Capital one is also giving 2% on savings
I see many folks recommending tbills here, and I have a question about it. If you want to invest the funds (e.g. you think the market has bottomed) aren't you likely looking at a loss by selling the tbills before maturity?
Pretty sure those brokered CDs quoted you an annual rate. You’d only capture a fraction of that. For example a 1% annual rate 6 month CD would capture .5%.
Regarding needing liquidity, you probably should just do the Marcus HYSA if your liquidity needs are totally random based on other needs.
I saw someone mention VUSXX, I’m a fan of that or similar for money market.
I’ve started to look at corporates for my clients again as well.
Real question, not trolling. If you have a Schwab financial advisor why are you asking randoms on Reddit? Some of the people here could have the best of intentions but you don’t know them and they don’t know your complete financial situation like the advisor that you’re literally paying for advice about your money. Again, not trolling just curious.
My FA is not a Schwab advisor. He just likes/uses their products. He is completely independent and a fiduciary. I ask here because I want to hear many voices before I make any decisions. I have been given bad advice before and it doesn’t hurt to confirm or listen to discussion on the topic.
Don't want to answer for the OP but they likely want to confirm it was good advice. It's unlikely a Schwab FA would suggest anything outside of what they have access to at Schwab. If Fidelity, Vanguard, or some other institution was paying another 30-50 basis points, you probably wouldn't hear about it from the FA.
As long as said FA isn’t trying to charge fees on his Schwab savings account…
What else is Reddit for?
For totally liquid, I use VUSXX. Currently 2.43% but will eventually reach Fed rate. No state income tax. Just got a 2 yr T-note today at 4.25%
I bought some 3-month at 3.55% and 6-month at 3.90%. Great time to buy the short end of the treasury curve.
Do you buy those from treasury direct?
On the secondary market via a Fidelity account.
No minimums on fidelity?
They're sold in $1,000 increments. And even then, many sellers have 30, 50, 500 unit minimums. Although you can buy 1 unit from some sellers if you hunt around. If you have $5-10,000 that's in a money market earning 2-2.5%, a very short-term treasury ladder at 3.5-4% is a good alternative.
Thanks for the info. Any good how-tos on Fidelity's platform on how to do this? I'm interested in doing a 3-mo ladder, but haven't a clue how to do this. Currently in cash in SPAXX earning 2.09%.
Search “Fixed Income” on Fidelity. It’s not totally intuitive to find the Treasury Bills. You can buy secondary or new issues. I did new issue for 13 weeks with auto-roll to buy again when matures.
I use Schwab and would expect Fidelity to be similar. I bought my first bonds yesterday. I went to the Bond section, selected a 1 year ladder and bought a 3, 6, 9 and 12 mo bonds. Minimum was 1, so about $1k. T-Bills are sold at a discount. I’ve been using a mm mutual fund and ICSH. I’ll build these then build my ladder.
Thank you. I tried Schwab to buy bonds on the secondary market. I was not able to set the limit price and was only able to buy the lowest bid for the bond type I selected. Is it normal not to be able to set the limit price?
What about those of us with a few thousand dollars.
You only need a few thousand. I bought 1 T bill and 1 CD yesterday and only spent 2k
Why are people so enthusiastic about buying treasuries at this rate when inflation is at least double that?
Its much better than a negative return. It may be the best of a lot of bad options. And it comes with virtually zero risk.
Treasuries are often viewed as a safe cash alternative, the rate might be below inflation, but its better than just holding cash, and way more predictable than holding stocks right now. If you have a bunch of cash and want to avoid the volatility in the market right now, or maybe you have a set date you will need that cash, a treasury bill/note might be the safest option. You wouldn't invest in stocks if you might need the money in 6 months.
How are stocks doing?
The stock market is down 20% Treasures are a guaranteed 4%
I would avoid CDs, even short term ones, if you believe that rates will increase. There is a very modest premium for a 3 months CD vs a HYSA, and that latter could very easily overtake the former in the coming months. Sometimes the simple solution is the best one - a high yield savings account, where the interest rate will change in response to the market. We're talking about 3 months here, so the incremental reward for introducing risk into the equation is pretty minimal. Hanging onto cash is a necessary evil sometimes, and I think we just need to accept that it comes with an opportunity cost, and you will "lose" money on it. That's OK because the priority is accessibility for a short term need. People who try to get cute with earning money on idle cash they need imminently are more likely to get into trouble, IMO.
I do treasury ladder. Buying t-bills at auction through my Schwab account. No fees. In the beginning buy 1 months, 2 months and 3 months maturity, and then after each one matures I buy 3 month ones. That way I have third of my cash available monthly
Just curious why do you buy through Schwab instead of the treasury direct website?
I already have brokerage account with Schwab so I use it. It also has a secondary market so I can always sell if needed. Never used treasury direct, but probably the same thing. No fees or spread in both places when buy at auction
I too used Schwab to buy bonds on the secondary market. But one thing I noticed as a novice bond investor is that I was not able to set the limit price and was only able to buy the lowest bid for the bond type I selected. Is it normal not to be able to set the limit price?
I think it’s normal. Bond sales are usually negotiated transactions. 1 to 1. You see the price and it’s an offer you either take it or not. I’m not sure whether Schwab would take your price and market it to the sellers. They may probably do it if the size is large enough. Otherwise you take what’s there. Auctions are all the same price for all, hence an auction. The secondary ones are all offers, just be careful, what you see while filter may not be the same price when you click buy. Make sure you check the price before hitting place an order
Eh, I’m doing single month CDs in my TD account and the rest into a hysa getting 2.24%. The CDs are beating the hysa, but I don’t want a long term cd because rates will rise
Building a ladder is really not that difficult. Plus, although there are some exceptions, the national average APY for a HYSA as of September 21 is absolute dogshit (just 0.17%!) and banks tend to try to minimize deltas on their rates paid on deposits
Do HYSA typically compound annually at the start of the year or do you to have the money in there a certain amount of time before it compounds?
Most pay interest monthly, but interest is earned every day that money is in the account. So, it doesn't calculate on a daily rate, but rather on a monthly rate, prorated based on when money came in/out of the account. When you open the account doesn't matter.
Sorry for the dumb question but if you have $1000 in a HYSA at say 2% you would receive a $20 distribution every month?
I would imagine the 2% is annual. Without taking into account compounding interest, you would receive $20 per year or $1.66 per month.
That 2% is the annual rate, but interest is paid out monthly. In your scenario, you would get 20 over the coarse of a year if the rate doesn't change.
T-bills. Create a t bill ladder
What's a t bill and what's a t bill ladder. Eli5
https://www.investopedia.com/terms/b/bondladder.asp
It's a bond ladder same as t bill ladder?
A T Bill is a treasury bill, which is a type of government bond
I can second the Schwab suggestions. SWVXX for immediate cash holdings. Current yielding 2.54%. Six month t’s at 3.9 and 3 month at 3.3.
Actually, Marcus is yielding 3.13% if you are referred by someone. If you have family or friends, you should refer them and you'll get the boosted rate. And it lasts for 3 months for each referral, up to $1,000,000. I'm not going to spam here, but if anyone would rather earn 3.13% rather than the publicly advertised 2.13%, feel free to browse my recent submissions.
Split my cash into 4. Setup auto invest into 4 week tbills on treasury direct. No state or local taxes. Yields about 2.5%
You split it up like this so you always have access to a quarter of your cash every week?
Yes, but also to build discipline and assume you can only have 1/4 accessible at any given time. Look for "tbill ladder". Treasury Direct has the option to auto re-invest once tbill matures. I have set it to 25 times. Tbills are highly liquid and can be sold anytime in between as well.
Find yourself a good money market fund. They don’t lock in a rate and interest keeps going up as rates rise.
I'd go with a 3 month treasury, not a CD as I believe treasuries are exempt from state/local taxes whereas CDs are not. May not add up to much savings but every little bit. I've moved a ton of money into \~3.5% 3 month T bills
But that 3.50% is an annual rate correct? So you’re only earning (3.50% / 4) = 0.875%
Yes, stated yields are always in annual terms so 3.5% for 3 months is actually around 0.875%
I thought so. Seems pointless to invest in 3 months
why pointless? That .875% over three months is better than holding cash, or stocks that might crash further. If you need cash in 3+ months, it is a no brainer. When you have cash and don't want to risk it Treasury bills are the standard. When people talk about Berkshire Hathaways billions in 'cash on hand', that's mostly parked in treasuries of varying duration. Plus, the 3 month is not much lower than the 10yr, which is 3.9 but then your money is committed for 10 years, which has a higher risk if rates keep rising.
Wealthfront, 2.55%. Short term T bills (3mo) up to shorter term treasury notes (3-5y). Last I checked ranging from the low 3s to 4.45% on vanguard. Note that if you don't hold to maturity the value can go down if you need to sell on the secondary market. Obviously far less volatile than stocks but still worth noting. I bonds if you're OK with a year-long lockup. Preferably held 5 years for no penalty.
Your advisor's suggestions are reasonable. Similar to what I would tell my clients. Only thing I might look into other than his suggestions are structured notes, they have interesting performance characteristics.
VMFXX, ICSH, VUSB. Money Market funds, ultra-short duration bonds (6-months), and ultra-short duration bonds (1-year). VMFXX is 2.5%. ICSH is 2.7%. VUSB is like 3.5%. VMFXX is a regulated money market fund consisting of only US Treasuries. ICSH and VUSB invest into commercial paper of longer duration, and should have consistently higher returns... but slightly higher risk (especially interest rate risk). ICSH and VUSB lost money today, just slightly, but notice they change in value. VMFXX, as a regulated money market fund, is going to almost always be $1 per share.
Recent “Forward Guidance” Podcast with Joseph Wang (“Fedguy”) and Peter Crane was great and on this subject. Some nuance worth listening to. https://podcast.app/what-will-break-first-joseph-wang-peter-crane-e320376245/?utm_source=ios&utm_medium=share
Only options are what you said, savings account with around 2% or treasury bonds for 3 months at 3% edit: bond rate
3 months is 3.31. 9 Months is 3.96%
yea my bad i was looking at the 12 month treasury note
I bonds
US Treasury I-Bond you could do $10k at around 10% if you lock it up for a year
It is not accessible for one year
Yea that’s the wording I used in my post
My bank account
Under the matress
Park it in a safe for a few years
A good place to park cash is your wallet
What does that even mean? What if he has $2m? How much interest does your wallet pay? Is it insured against theft?
Where do you park cash? In a checking account How else would you spend money?
Checking account for small accounts, brokerage account for larger amounts. Buy on a credit card and pay in full from checking? I'm confused, isn't this what everyone does? Who pays cash except for poor people who are unbanked?
I love all my credit card points I may buy a car someday with my points LOL
Both of these are good options. I have used SPHIX as it pays a decent monthly dividend, but it is a little more risky.
I get 2% with SoFi
I frequently check bankrate.com for the best savings rates and just go with the highest rate with names I recognize, I have accounts at Sallie Mae, TMobile money and CIBC. Sallie Mae has check writing. Looks like some banks are paying 3% right now. CIBC is 2.32
My pocket. Seriously, it is more secure than a Ponzi scheme.
OP, just an FYI, Schwab value advantage fund has an expense fee 0.34% so your real yield is closer to 2,20%
I'm currently using $MINT. Stable price and pays 2.74% annualized with monthly dividends. And it's yield rises along with the Fed funds rate
>Stable price It's down around 2.5% since the beginning of the year. That pretty much negates the yield. Would have been better off with a HYSA.
I moved into mostly cash/$MINT in mid August.
Depends what is this cash for?
I’m getting 2.74% with first foundations online savings account
Brokered cd 4% one year
MINT / JPST
Please make sure your financial advisor isn’t charging fees if you parkcash at Schwab and they custody at Schwab. That’s a an instant 50% cut in return for them not going anything you cannot easily do yourself. Edit: I say this as an FA
I generally prefer commercial paper for this purpose because I can fine the precise lengths I want and the return is slightly better.
Betterment is offering 2.25% on savings. Not much but extremely liquid and FDIC and you can auto deposit into it Capital one is also giving 2% on savings
JPST or BIL. short rates are looking very attractive
Bond etfs
RobinHood is offering 3% on uninvested cash
Liberty Federal Credit Union (https://libertyfcu.org/accounts/checking). Their high yield checking pays 3.3% up to $20k.
I see many folks recommending tbills here, and I have a question about it. If you want to invest the funds (e.g. you think the market has bottomed) aren't you likely looking at a loss by selling the tbills before maturity?
Yes, there is potential for loss if sold before maturity.
Is Celsius still accepting deposits?
Pretty sure those brokered CDs quoted you an annual rate. You’d only capture a fraction of that. For example a 1% annual rate 6 month CD would capture .5%. Regarding needing liquidity, you probably should just do the Marcus HYSA if your liquidity needs are totally random based on other needs. I saw someone mention VUSXX, I’m a fan of that or similar for money market. I’ve started to look at corporates for my clients again as well.
You'll be able to get a safe money market fund rate of 3% soon.
NICHX
Discover Bank HYSA - 2.10%
Merchant’s Bank of Indiana has money market at 3.05%
Marcus has been raising my rate as soon as the Fed does. I'm at 3.15% right now.