cancel
Showing results for 
Search instead for 
Did you mean: 
     
Highlighted
Contributor ○○

Looking for suggestions where to put cash since MM interest rates are currently almost negligible, and probably will remain so for the foreseeable future. Have a significant amount of cash sitting on the sidelines that I will not invest until I get a better sense how this downturn, that is “without modern precedent” according to Fed Chair Powell, evolves. 

For example, I am currently checking out ICSH, an ultra short-term bond ETF, with a 12-month trailing yield of 2.34%. The fund lost 0.87% in March. It has an ER of 0.08%, a SD of 0.79%, and 76% of the bond portfolio is AAA-A and 22% BBB rated.

Any other recommendations are appreciated.

Fred

 

Tags (1)
0 Kudos
1 Accepted Solution or Best Answer

Accepted Solutions
Highlighted
Contributor ○○

I like to express my thanks and appreciation for the many helpful comments and suggestions I received from so many of you.

At this point, I have narrowed down my selection to these three funds: BSV, ICSH and PPVFX. I selected these funds primarily with the following criteria in mind:

- a positive YTD total return,

- a loss of < 1% in March,

- SD < 1.75,

- yield > 1.75%,

- and the percentage of bonds rated AAA-A > 75%.

Since I currently have a significant amount of my portfolio in cash/MM (approx. 60%), it will be allocated among these three conservative funds until, as I said, I get a better sense how this downturn, that is “without modern precedent” according to Fed Chair Powell, evolves.

Hence, as a retired investor, I need to keep reminding myself at times that my top priority, during this highly unusual and extremely uncertain time, is and remains capital preservation.

Thanks, again.

Fred

View solution in original post

0 Kudos
120 Replies
Highlighted
Frequent Contributor

@fred495 wrote:

Looking for suggestions where to put cash since MM interest rates are currently almost negligible, and probably will remain so for the foreseeable future. Have a significant amount of cash sitting on the sidelines that I will not invest until I get a better sense how this downturn, that is “without modern precedent” according to Fed Chair Powell, evolves. 

For example, I am currently checking out ICSH, an ultra short-term bond ETF, with a 12-month trailing yield of 2.34%. The fund lost 0.87% in March. It has an ER of 0.08%, a SD of 0.79%, and 76% of the portfolio is in AAA-A and 22% in BBB rated bonds.

Any other recommendations are appreciated.

Fred

 


Fred, I am struggling with the same issue.  Since I am at Schwab, you may be looking at a different brokerage for your options, but I have a significant amount of cash in SWSBX.  I still maintain some monies in Schwab Money Market funds, but like you, I prefer to take some additional risk, to get a little more return.  Other funds I monitor, that look promising (depending on your risk criteria) include BSBIX, VUSFX, and FCONX.  

Highlighted
Contributor ○○

Some discussions here: https://community.morningstar.com/t5/Fidelity-Investments/Where-do-you-keep-cash/td-p/696980

For me, (1) stable value funds (e.g., Metlife 3% APY, Managed Income 2.5% APY) in my 401A/403B, (2) TIAA Traditional annuity (if considered as cash), (3) 3-year add-on CDs from NFCU, and (4) Reward Checking Accounts.

0 Kudos
Highlighted
Frequent Contributor

See related discussion here where I indicated short-term investment-grade bonds,   https://community.morningstar.com/t5/Fidelity-Investments/Fidelity-Gov-t-Core-vs-Prime-MM-Yields/m-p...

YBB
0 Kudos
Highlighted
Frequent Contributor

@fred495 wrote:

Looking for suggestions where to put cash since MM interest rates are currently almost negligible, and probably will remain so for the foreseeable future. Have a significant amount of cash sitting on the sidelines that I will not invest until I get a better sense how this downturn, that is “without modern precedent” according to Fed Chair Powell, evolves. 

For example, I am currently checking out ICSH, an ultra short-term bond ETF, with a 12-month trailing yield of 2.34%. The fund lost 0.87% in March. It has an ER of 0.08%, a SD of 0.79%, and 76% of the bond portfolio is AAA-A and 22% BBB rated.

Any other recommendations are appreciated.

Fred


Hi Fred,

Thanks for the ICSH mention. The yield is almost crazy high for an Investment-grade, ultra-short non-leveraged ETF. Maybe thinly-traded with big coupons, brokered CD's on the secondary market, or targeting credit downgrades somehow?

I don't know how they do it.

For comparison, I just charted the risk-free rate in Excel.

5-12 Yield Curve.jpg

The ICSH yield would be off this chart. I was going to go shopping in the secondary brokered CD market this afternoon, but I think I might dig into ICSH instead.  If this is real, it will be tough to beat. Especially if the cash is immediately available.

As a Fidelity customer, I have been happy with FCONX.  There are no round-trip limitations, and I don't need to wait for cash to settle. I can choose "sell and use proceeds to buy another". If it is a Fidelity OEF, both transactions will take place at days end. For a longer duration OEF (not for cash), I added to FCBFX the other day. 

 

Thank you,

Holiday

0 Kudos
Highlighted
Participant ○

You might want to check out Tactical Bond Strategies on M* home page by Alex Bryan.

 
0 Kudos
Highlighted
Contributor ○○

@dtconroe wrote:

@fred495 wrote:

Looking for suggestions where to put cash since MM interest rates are currently almost negligible, and probably will remain so for the foreseeable future. Have a significant amount of cash sitting on the sidelines that I will not invest until I get a better sense how this downturn, that is “without modern precedent” according to Fed Chair Powell, evolves. 

For example, I am currently checking out ICSH, an ultra short-term bond ETF, with a 12-month trailing yield of 2.34%. The fund lost 0.87% in March. It has an ER of 0.08%, a SD of 0.79%, and 76% of the portfolio is in AAA-A and 22% in BBB rated bonds.

Any other recommendations are appreciated.

Fred

 


Fred, I am struggling with the same issue.  Since I am at Schwab, you may be looking at a different brokerage for your options, but I have a significant amount of cash in SWSBX.  


 

SWSBX looks like an excellent choice, dt. However, I don't have an account at Schwab. At my brokerage firm I would have to pay a transaction fee of $75 to purchase shares in the fund. In the meantime, I am checking out PPVFX, another fund that has a somewhat similar risk/reward profile but is NTF at my brokerage.

But, I am still intrigued by ICSH which has a yield of 2.34%, according to the fund's website, and a very low SD of 0.79%. Looking at the monthly total returns since January 2016, the fund never had a loss except in July 2016 (-0.09%) and March 2020 (-0.87%), an almost MM like performance for over four years.

Good luck,

Fred

Addendum: By the way, just found out that SWSBX and BSV/VBIRX are both S/T bond index funds that track the performance of the Bloomberg Barclays U.S. 1-5 Year Government/Credit Float Adjusted Index. Hence, they have almost identical risk/reward profiles, and BSV is available at my brokerage without a fee. 

0 Kudos
Highlighted
Frequent Contributor

Re: Where to Put Cash? [Ultra & ST ETFs]

Solved or there is a best answer. Go to solution.

March 2020 bond crash gave an opportunity to evaluate ultra ST and ST bond ETFs. Only investment-grade ETFs are considered; ST HY presented their own risks and problems and are not included here.

ETFs [with T+2 settlements] don't have the trading restrictions of OEFs [with T+1 settlements]. Fido NTF will charge for OEF sale within 60 days and Schwab NTF will charge for OEF sale within 90 days. At most brokerages, ETFs and stocks now trade commission-free.

First the categories:

ST ultra: ICSH, JPST, MINT

ST: BSV, ISTB, FLTB  [these have a mix of mostly ST-government and some ST-corporates]

ST corporates: VCSH, SCHJ, IGSB

ST muni: SUB

ST Treasuries: SHY

The first comparison is for the 1st member in each category to see how different categories did in the crash. The time period is the start of the bond crash on 3/5/20. A peculiar thing about Stockcharts is that customized dates change to default 1-yr after a few days. Alternative would be to show static screenshots of charts but I think that live chart links are more useful even if the readers may have to adjust the start dates later.

Various categories: ICSH, BSV, VSCH, SUB, SHY. Note that BSV doesn't have ultra in its name but it did similar to ICSH that has ultra in its name [so, ultra is for PR only?]. Also, those with spreads [corporates, muni] were hit hard and had high single-digit % or double-digit % declines from the highs.   https://stockcharts.com/h-perf/ui?s=ICSH&compare=BSV,VCSH,SUB,SHY&id=p45543080988

In the ST-ultra group ICSH, JPST, MINT, all acted similarly but MINT was the worst [reason may be the complexity of this active ETF]. Also note that the ST ultra category around 2008 was quite different from what it is today.   https://stockcharts.com/h-perf/ui?s=ICSH&compare=JPST,MINT&id=p92264346934

In the ST group [with mixed government+corporates] BSV, ISTB, FLTB, limited-term FLTB with longer duration [it is also active] did the worst.   https://stockcharts.com/h-perf/ui?s=BSV&compare=ISTB,FLTB&id=p53499588915

In the ST corporates group VCSH, SCHJ, IGSB, all acted about the same and were the worst in the categories; some would say shocking for ST but then there was a crash.   https://stockcharts.com/h-perf/ui?s=VCSH&compare=SCHJ,IGSB&id=p99252282208

There are many more ST bond ETFs but I picked the above based on their large AUMs, familiarity with their sponsors and/or low ERs. Posters are free to point out other favorites.

YBB
Highlighted
Contributor ○○

@Holiday wrote:
Hi Fred,

Thanks for the ICSH mention. The yield is almost crazy high for an Investment-grade, ultra-short non-leveraged ETF. Maybe thinly-traded with big coupons, brokered CD's on the secondary market, or targeting credit downgrades somehow?

I don't know how they do it.

The ICSH yield would be off this chart. I was going to go shopping in the secondary brokered CD market this afternoon, but I think I might dig into ICSH instead.  If this is real, it will be tough to beat. Especially if the cash is immediately available.

Thank you,

Holiday


I hear you, Holiday. As you say, I don't know how they do it.

As I noted on another post, I am still intrigued by ICSH. Particularly, when I look at the monthly total returns since January 2016, apparently the fund never had a loss except in July 2016 (-0.09%) and March 2020 (-0.87%), an almost MM like performance for over four years.

Hope you don't mind sharing any additional information that you may uncover about this fund.

Thanks,

Fred

0 Kudos
Highlighted
Contributor ○○

Re: Where to Put Cash? [Ultra & ST ETFs]

Solved or there is a best answer. Go to solution.

Thanks, YBB, for this very helpful information. Will certainly spend some time checking it out, particularly ISTB and BSV.

Much appreciated.

Fred

0 Kudos
Highlighted
Frequent Contributor

@fred495 wrote:

Looking for suggestions where to put cash since MM interest rates are currently almost negligible, and probably will remain so for the foreseeable future. Have a significant amount of cash sitting on the sidelines that I will not invest until I get a better sense how this downturn, that is “without modern precedent” according to Fed Chair Powell, evolves. 

For example, I am currently checking out ICSH, an ultra short-term bond ETF, with a 12-month trailing yield of 2.34%. The fund lost 0.87% in March. It has an ER of 0.08%, a SD of 0.79%, and 76% of the bond portfolio is AAA-A and 22% BBB rated.

Any other recommendations are appreciated.

Fred

 


I have that fund too, ICSH. It is down just a bit. I use it like a bank CD, paying about two percent and fairly safe. I have NEAR, but that one went down more, I have not added to these funds.

I have added a bit of intermediate bond funds, VBILX, VCOBX and some VFIIX, not much else lately

0 Kudos
Highlighted
Contributor ○○

@FatKat wrote:

 

I have that fund too, ICSH. It is down just a bit. I use it like a bank CD, paying about two percent and fairly safe. I have NEAR, but that one went down more, I have not added to these funds.

        I have added a bit of intermediate bond funds, VBILX, VCOBX and some VFIIX, not much else lately.

 

Thanks, @FatKat, for sharing your hands on experience with ICSH.

I don't have an account at Vanguard and would have to pay a transaction fee of $75 to access any of the three funds you are referencing above. I am currently invested in only two bond OEFs, ANBEX and TGLMX. So far, so good.

In the current turbulent market environment, my top priority is protecting my portfolio's assets, hence my search for conservative cash/MM alternatives.

Good luck,

Fred

 

Fred


0 Kudos
Highlighted
Frequent Contributor

Re: Where to Put Cash? [Ultra & ST ETFs]

Solved or there is a best answer. Go to solution.

Paul Merriman has historically suggested Vanguard's short term IG corporate bond fund, VSCSX, particularly since money markets have such low returns now, taking a little of such corporate risk gives better return for money you may want to tap relatively soon.  I think worth considering at any rate, if you have access to Vanguard Admiral funds.   

0 Kudos
Highlighted
Frequent Contributor

Re: Where to Put Cash? [Ultra & ST ETFs]

Solved or there is a best answer. Go to solution.

Note that VCSH is the ETF class of VSCSX, and BSV that of VBIRX.

ETF FLTB is a cousin of FJRLX, and ETF MINT is a cousin of PSHAX.

YBB
0 Kudos
Highlighted
Participant ○○

Re: Where to Put Cash? [Ultra & ST ETFs]

Solved or there is a best answer. Go to solution.

@PaulR888 wrote:

Paul Merriman has historically suggested Vanguard's short term IG corporate bond fund, VSCSX, particularly since money markets have such low returns now, taking a little of such corporate risk gives better return for money you may want to tap relatively soon.  I think worth considering at any rate, if you have access to Vanguard Admiral funds.   

 


VSCSX

VSCSX.png

 

0 Kudos
Highlighted
Frequent Contributor

Re: Where to Put Cash? [Ultra & ST ETFs]

Solved or there is a best answer. Go to solution.

@Hootz wrote:

@PaulR888 wrote:

Paul Merriman has historically suggested Vanguard's short term IG corporate bond fund, VSCSX, particularly since money markets have such low returns now, taking a little of such corporate risk gives better return for money you may want to tap relatively soon.  I think worth considering at any rate, if you have access to Vanguard Admiral funds. 


Strangely VUSFX (ultrashort) yields about the same with a shorter duration of 0.9 yr. I guess the yield curve is flat there. Not that it matters - rates aren’t going up.

0 Kudos
Highlighted
Frequent Contributor

Re: Where to Put Cash? [Ultra & ST ETFs]

Solved or there is a best answer. Go to solution.

2 weeks ago analyzed it already(link).  

FCONX duration = 0.4    JPST=0.95     ICSH     SWSBX duration=2.65 

AS expected, the first 3 are mostly in Corp bond. SWSBX is a typical ST bond mostly in Gov bond.

ICSH is unique with 45% Corp + 54% cash & Equivalents.

There is a problem with M* charts for all 4 but I can do 3 (chart)  or I can do FCONX+JPST+ICSH (chart)

FCONX has the worse performance, easy no

JPST vs ICSH.  JPSTX a bit better until 2020 where ICSH didn't lose as much, coming from the bottom JPST did better.

icsh.PNG

==================

Paul Merriman is wrong, nothing new  (chart)   :-)   VSCSX lost over 7% from peak to trough in 03/2020.

 

0 Kudos
Highlighted
Frequent Contributor

Re: Where to Put Cash? [Ultra & ST ETFs]

Solved or there is a best answer. Go to solution.

FD ...  Mr. Merriman has been suggesting VSCSX for several years now.  It has done well for years up until March when spreads blew out, even in high quality bonds.  People were selling indiscriminately.  The March bond re-pricing was bad and swift.  IG debt dropped huge peak to trough in 3 weeks before snapping back.  VSCSX has recovered.  

Since you throw your customary darts at Mr. Merriman, I remind you of your once touted DHEAX as your cash equivalent fund.  Remember that call of yours?  VSCSX is up .8% YTD and 4.4% over past year.  Your DHEAX is down 8% YTD and down almost 6% over the past year.  Who made the better call?

Highlighted
Follower ○○○

Another ultrashort ETF is VNLA, Janus Henderson Short Duration Income ETF. I use this along with VUSFX for my near cash holdings.

VNLA has a SD of 1.32, SEC Yield of approx. 2%, duration of 1.61 years and is considered an ultrashort income fund. It holds up fairly well with JPST in 1-month, 3-month and YTD. It's heavy on corporates for sure.

0 Kudos
Highlighted
Frequent Contributor

Re: Where to Put Cash? [Ultra & ST ETFs]

Solved or there is a best answer. Go to solution.

@PaulR888 wrote:

FD ...  Mr. Merriman has been suggesting VSCSX for several years now.  It has done well for years up until March when spreads blew out, even in high quality bonds.  People were selling indiscriminately.  The March bond re-pricing was bad and swift.  IG debt dropped huge peak to trough in 3 weeks before snapping back.  VSCSX has recovered.  

Since you throw your customary darts at Mr. Merriman, I remind you of your once touted DHEAX as your cash equivalent fund.  Remember that call of yours?  VSCSX is up .8% YTD and 4.4% over past year.  Your DHEAX is down 8% YTD and down almost 6% over the past year.  Who made the better call?


Let's look at facts, I posted about Merriman but you posted about me.  So, before you complain take a note.

VSCSX isn't proper as cash, after all, it lost over 7% regardless of what it did YTD or longer-term.  Someone who wants cash wants an investment that doesn't lose money.

I posted about funds such as SEMMX,PUTIX,DHEAX as "cash sub" (pay attention to the "" "") for people who understand the risk and know what they are doing. Any posters who didn't understand the risk and didn't do their due diligence it's their fault. 

But, we also know that you didn't understand your portfolio risk, you admitted that and was surprised...mmm...I wasn't.  It's not a surprise you collected many funds over the years and thought your portfolio is diversified.  It's not the quantity it's the quality.

Announcements

Morningstar is here to help you respond to the Coronavirus crisis.