Where to invest cash assets?

[TopHatFox]

Where do you store your percentage of cash assets? I have mine in a credit union's Savings & Checking account. (As a side note, I don't really understand why these can't just be merged into one account since they both offer similar returns in my bank).

I was thinking, where else can I place my cash holdings so they provide a still immediately liquid but slightly higher return--maybe a money market account with Vanguard?

[Chad]

Banks have separate savings and checking accounts, because the balance in savings accounts are very predictable (deposited, but rarely taken out) and checking balances are not. This means they don't want to incentivize anyone to keep money in the checking accounts, as it makes it difficult to forecast how much money they will have in the next week, month, etc. Plus, by not paying interest in one type of account they save money.

There aren't a lot of good options for cash right now. Money markets have basically the same rate as savings accounts right now (not a historical norm). I would keep these in liquid savings accounts at this point, as it's almost guaranteed the Fed raises rates this year. At least wait until they raise the rates once or twice to tie up your cash in longer term money markets/CDs.

There are some accounts with special rates (3-5%), but these require you to jump through some hoops. Like this one:

http://www.myconsumers.org/personal/che ... cking.html

I'm not recommending that, just showing an option.

[fiby41]

I don't really understand why these can't just be merged into one account since they both offer similar returns in my bank

We don't have this problem here. Every account is a saving account until a high minimum monthly turnover threshold is crossed after which it gets converted to current account with 0% interest rate semipermanently.

This is mostly used by businesses/individuals who use their account for paying out salaries, high volume transactions, receiving large number of payments etc.

[SimpleLife]

Most of my money is tied up in real estate. What cash I do have on hand is kept liquid to invest in more real estate so I don't really participate in CD's and such since I tend to buy a house nearly every year.

[TopHatFox]

There aren't a lot of good options for cash right now. Money markets have basically the same rate as savings accounts right now (not a historical norm). I would keep these in liquid savings accounts at this point, as it's almost guaranteed the Fed raises rates this year. At least wait until they raise the rates once or twice to tie up your cash in longer term money markets/CDs.

Well, I get .10% with the 3-4k, 6-month's expenses I keep in my checking/savings accounts-- https://www.umassfive.coop/products/sav ... s-accounts --so anything more than that percentage is nice, while keeping the contents liquid. I don't really use my bank account more than 1-10 times in any given month, just for relatively large expenses like rent & monthly food costs.

Interestingly, Vanguard's Prime Money Market Fund (3k minimum) shows only a .02% yield-- https://personal.vanguard.com/us/funds/ ... IntExt=INT --which is 1/5 of the basic savings account above. What's up with that unintuitive disparity; shouldn't the money market fund at least match a basic savings account? Maybe I'm looking at the two accounts wrong.

[jennypenny]

I think Vanguard keeps the the interest rate on their money market fund low to encourage account holders to invest in other Vanguard funds instead.

[George the original one]

Cash... bank rates suck. Best 5-yr jumbo CD ($100k min!) is 2.27%. Smaller amounts and smaller periods are less, as you already know.

Bond funds as an alternative are at least yielding reasonable amounts. Question you have to ask yourself is how soon leverage or rising interest rates kill your capital before you earn any interest. If you're up for gambling (set a mental stop loss!), buy a closed-end government bond fund yielding 5%-7% with monthly dividends. 2-3 months of dividend payments with no capital decline and you've beat the checking/savings account; takes only 3 days to get your money out if you're hit a stop loss.

[Tyler9000]

I carry a lot of cash as part of my Permanent Portfolio. Personally, I prefer short term treasury funds (1-3 years duration) like SHY or SCHO. I use SCHO because the fees are lower.

It takes a few days to clear the money back into checking when I need it, but it's plenty fast for my needs.

[NPV]

There are some accounts with special rates (3-5%), but these require you to jump through some hoops. Like this one:

http://www.myconsumers.org/personal/che ... cking.html

I'm not recommending that, just showing an option.

Chad, are there any downsides to this besides the activity requirements? Are these deposits insured similarly to bank savings accounts?

5% guaranteed seems very appealing...

[NPV]

Also curious to know whether there are similar offers which do not cap investment at 20k...

[Chad]

These types of promotional accounts with high rates are generally FDIC insured. The downside is they always have some type of hoop to jump through like "you must spend $1000/month", "set up a direct deposit", "any balance over $5,000 gets an interest rate of .2%", "18 years old or younger", etc. You would have to read the fine print for any of these promotional rate accounts before you actually deposit money and some get convoluted. I stated I wasn't necessarily recommending the promotional account at that link because I hadn't read the fine print.

I'm unaware of similar offers with a larger limit, but I haven't looked for those.

[fiby41]

While this is illiquid, since we are discussing guaranteed high returns through banks...

Some cooperative banks* offer high interests on LTSDs, upto 10.5% with the conditions / catch being:

1. No lien
2. Non transferable
3. Non cancelable under any circumstances
4. Term is of 7 years with interest paid quarterly
5. Minimum amount INR 50000

* List of type of banks by security of principal:

1. Government banks
2. Public listed banks
3. Private banks
4. Cooperatives

Interest rates offered on FDs are in reverse order.

Saving accounts yield 4.5% and interest on FDs range from 7.5% to 9.5% while CPI is around 8%.

I've 5/7 in LTSD and the remaining in saving account. For detailed split: viewtopic.php?t=6084

[NPV]

These types of promotional accounts with high rates are generally FDIC insured. The downside is they always have some type of hoop to jump through like "you must spend $1000/month", "set up a direct deposit", "any balance over $5,000 gets an interest rate of .2%", "18 years old or younger", etc. You would have to read the fine print for any of these promotional rate accounts before you actually deposit money and some get convoluted. I stated I wasn't necessarily recommending the promotional account at that link because I hadn't read the fine print.

I'm unaware of similar offers with a larger limit, but I haven't looked for those.

Thanks again Chad. Just wanted to piggy back off your research Sounds like a bit of a hassle.

I am curious, has anyone looked into annuities touted by Tony Robins in his recent investment book?

[NPV]

While this is illiquid, since we are discussing guaranteed high returns through banks...

Some cooperative banks* offer high interests on LTSDs, upto 10.5% with the conditions / catch being:

1. No lien
2. Non transferable
3. Non cancelable under any circumstances
4. Term is of 7 years with interest paid quarterly
5. Minimum amount INR 50000

* List of type of banks by security of principal:

1. Government banks
2. Public listed banks
3. Private banks
4. Cooperatives

Interest rates offered on FDs are in reverse order.

Saving accounts yield 4.5% and interest on FDs range from 7.5% to 9.5% while CPI is around 8%.

I've 5/7 in LTSD and the remaining in saving account. For detailed split: viewtopic.php?t=6084

Nice % numbers, but this is far from risk free - you have EM currency risk and broader EM country risk. Probably inflation eats a significant share of these returns as well.

[Chad]

@NPV
No problem. Those promotional rate accounts can be difficult to find. They are usually targeted at low income people just starting out their adult life. The banks are trying to create a long-term customer with a high teaser rate. They don't want someone putting $500k in a 5% interest bearing FDIC insured account when most money markets are at 1% or less.

[NPV]

Found this one: https://www.nemeabank.com/personal/term-deposit-account

Curious to see if anyone has experience with this bank / understand how they can pay 3.5% in EUR? When something looks too good to be true, it typically is, but so far I have not been able to find the catch (e.g., the deposits up to 100k EUR seem to be protected by government deposit insurance).

[NPV]

Found this one: https://www.nemeabank.com/personal/term-deposit-account

Curious to see if anyone has experience with this bank / understand how they can pay 3.5% in EUR? When something looks too good to be true, it typically is, but so far I have not been able to find the catch (e.g., the deposits up to 100k EUR seem to be protected by government deposit insurance).

[Miss Lonelyhearts]

FDIC insured online account. They don't pay much, but it's 7-10x the rates at your local bank. Getting money in/out generally requires two business days.

[Gilberto de Piento]

I get 2% at my local credit union checking account. There is a 20000 limit and it requires one direct deposit and 12 debit purchases a month.

[Chris]

Yeah, you need to go online for the "best" rates. CapitalOne360 Savings is 0.75%, with no minimums. Though honestly, depending on how much cash you have, the $25 bonus may exceed your interest earnings for the year.

For "deep cash", I-bonds are an option. The rate is also variable (1.64% now), but it's tax-deferred. There's a penalty if you pull sell before 5 years though. $15k max purchase per year.