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

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Digressing from topic, but to discussion on yield vs risk I cite Pimco Income.  It is a unique fund within Pimco as its goal is to provide a consistent dividend income ("yield").  As such it is unconstrained and can go anywhere within the global bond asset opportunity set.  However, it does not use an aggressive strategy like other Pimco funds may use.  It actively manages within a defensive mindset, willing to accept short term volatility in exchange for long term resiliency.  For example, it will invest in banking sector which is volatile but healing.  What goes hand in hand with seeking yield is increased volatility which to me is risk.  As we have seen in the past, Pimco Income can lose high single digits at times but should rebound as it follows its "bend but not break" investing philosophy.  If someone can't tolerate the "bend" and wants true ballast and minimum risk, Pimco Income is not the right fund.  A core intermediate bond fund would be more appropriate.  

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

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While it was a bit of a learning curve we all discovered, other than YBB due to his warnings about IOs and POs in SEMMX, I did on several occasions protest about SEMMX being a "cash sub" and the riskiness of the junk holdings. I will attempt to dig one post out of the archives. We are back to SD lulling most asleep as to the risk of this fund. To most everyone it was not risky until it was. The major risk of SEMMX was not the holdings as much as the people holding it. They bailed en masse creating a liquidation issue the fund was unprepared for. Turns out the fund was a one trick pony suited for only gradually changing rates and a good equity market.

I would suggest that there is relative risk between funds. SD would help decipher risk between funds. Then there is absolute risk which is what we experienced. SD does not help decipher that.


@RainGater wrote:

@Gary1952 wrote:

In a forum like this how can anyone not understand "2% yield = less risky, 4% yield = more risky"? It is so basic.


Of course, it's risky with *hindsight* as a guide. I didn't see you or anyone, for that matter, post that SEMMX is a very risky fund before Feb of this year. In fact, most of the bond gurus touted SEMMX as a a rock solid investment and some even proclaimed that it is a "CASH SUB" and you can sleep well at night - apparently, "CASH SUB" has different meanings in M* forums.

Btw, no one is blaming others for the investing decisions - it's just that it will be nice to see, for a change, when someone admits that they were wrong about a fund or two. I was wrong about most of the bond OEFs like SEMMX, PIMIX, JMSIX, SPFLX, etc. as I chased yield/performance over quality.  Instead of picking bonds to act as a ballast to my stocks, I wanted the bonds to perform as well as stocks. Big mistake and lesson learned with a roughly 7% loss and if you take into account all the dividends over the last couple of years, I may be even positive on these trades. No big deal.

In fact, I am very very happy that this bond massacre has given me great opportunities to buy stocks after a historic run last year.  

PS: I broke my promise within 12 hours and posted again on this topic. **bleep**!


 

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

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@Gary1952 wrote:

While it was a bit of a learning curve we all discovered, other than YBB due to his warnings about IOs and POs in SEMMX, I did on several occasions protest about SEMMX being a "cash sub" and the riskiness of the junk holdings. I will attempt to dig one post out of the archives. We are back to SD lulling most asleep as to the risk of this fund. To most everyone it was not risky until it was. The major risk of SEMMX was not the holdings as much as the people holding it. They bailed en masse creating a liquidation issue the fund was unprepared for. Turns out the fund was a one trick pony suited for only gradually changing rates and a good equity market.

 

Paul:  Hi Gary ...  Out of curiosity I perused the "A Slightly Different OEF Bond Thread" for cautionary comment on SEMMX.  I missed YBB caution so good for him if he sniffed that out.  You and Dt noted some risky aspects about the fund but basically it seems that fund fooled us.  We all did varying analyses and we all seemed to like to varying degrees.  The best analysis cannot withstand a market shock like Covid where securitized assets instantly degraded, spreads blew out even for high quality bonds as investors sold everything in sight.  30 year professional bond managers admit they never saw anything like it in swiftness and magnitude.  I am not embarrassed to admit my portfolio lost more than I expected.  Some of the bigger losses in my bond portfolio are recovering;  I view them as bent but not broken so I am sticking with them.  Some of my REITs are broken but I still believe in their long term recovery.  If people still own SEMMX, I would consider it broken.  The question is do you still believe in a long term recovery and that should determine what you do with it.  


 

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

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This is turning out to be a pretty good thread, some interesting and helpful posts.  

@FatKat  FXNAX is on my radar and is a fund I'm seriously considering.  I have also been thinking of adding a GNMA fund, it's good to know that you like FGNMX.

As for PONAX, some good thoughts on that fund (already forgot who posted it, I'm just up for a few minutes and am a bit fuzzy).  I have been thinking about getting back into that fund.   

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

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@dtconroe wrote:

@Gary1952 wrote:

In a forum like this how can anyone not understand "2% yield = less risky, 4% yield = more risky"? It is so basic.


Yield and Risk are not necessarily correlated. For example RPHYX and VFUSX both have about the same SEC Yield (2.25% and 2.17%), but one has negative total return for each of the M* 2020 measurement periods (one week, one month, 3 month, YTD), while the other has  positive total return for each of the 2020 measurement periods.  When you look at "risk" under the M* risk icon for each fund, there is no mention of yield anywhere on that page.  Instead M* discusses risk in conjunction with total return.  You can find numerous examples of investments that have very low yield that are clearly more risky than investments with higher yield.  It does not appear that clear to me that % yield=risk.


Hi @dtconroe ,

I think yield is part of the risk picture; especially when you consider spreads.

In your example, RPHYX holds junk bonds which are thinly traded, and VSUFX is an investment grade fund which is very liquid. RPHYX died on liquidity. Flight-to-safety helped VSUFX. 

So, RPHYX has two liabilities: Liquidity risk, and Credit risk while the (presumably) lower average-weighted coupon of VSUFX is more sensitive to changes in the federal funds rate.

So, armed with this additional information, would you choose (Liquidity risk + Credit risk)  or (interest rate risk) when offered the same yield? In my case, I chose (and wound up with) a high-quality bond portfolio as the "yield spread" narrowed.

Another example where the yield spread has narrowed is "term premium"

5-12 Yield Curve.jpg

Sorry about the 10-day old data, I really do need to keep this updated.

But, if today was the 13th of May, you would notice that there is a 0.59% spread between the 1-month and the 10-year yield. The question is if $59 per $10,000 adequate compensation for (mental calculation) 8 years of duration? My answer is again no.

So, in the accounts I am taking retirement distributions from, I am overweight high-quality and bar-belled between long and short maturity with my bond funds.  My ladders fill in the intermediate space.

In my longer term accounts, I am positioned high-quality and equal weighted short, intermediate, and long with 6 mutual funds.  Short FCONX and FJRLX, Intermediate FPIDX and FTBFX, Long FNBGX and FCBFX.  

I have been watching high-yield and might add FHIFX which is 75% BB's and 25% B's. The yield spread is still too narrow for my taste. I think solvency crisis might become the next headline news as states reopen.

So, my process is not simply "yield" but more about spreads, or comparative analysis. Investment grade or junk for the same yield?  Investment grade.  Intermediate or short for the same yield?  Short. Liquid or sell-by-appointment for the same yield? Liquid.

Price and yield history should be only a piece of analysis. In many cases, anomaly pinpoints advantage

Thank you,

Holiday

 

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

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Vanguard ultra-short term bond fund VUSFX/VUBFX has no corresponding ETF, correct?  I assume that the closest Vanguard ETF that matches VUSFX/VUBFX is BSV (short term bond)?

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

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@FD1001 wrote:

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

 


Just one week since I posted the above and JPST is ahead of ICSH by 0.15

jpst.PNG

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

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Hi FD,

Cash Funds 1.jpg

JSPT did indeed recover faster.  I think it's problems may have been not having enough liquidity (like treasury bonds) to cover the unexpected demand for redemptions.

FCONX works for me because I am a Fidelity Customer, and it is my "cash" holding for my Fidelity OEF allocation which trade at the end of the business day.  I can choose "sell dollars and use the proceeds to buy another fund" and both transactions execute at the close.  Also, FCONX has no round-trip restrictions.  I can buy from it in one transaction and sell into it with another on the same day.

From the FCONX prospectus:

The fund generally invests in liquid money market and short-duration debt securities and the Adviser anticipates that shareholders may purchase and sell shares of the fund frequently. Accordingly, the Board of Trustees has not adopted policies and procedures designed to discourage excessive trading of fund shares and the fund accommodates frequent trading.

The fund has no limit on purchase or exchange transactions but may in its discretion restrict, reject, or cancel any purchases that, in the Adviser's opinion, may be disruptive to the management of the fund or otherwise not be in the fund's interests.

So, FCONX has the same disclaimer that would allow them to reject redemption requests that JSPT does, but did not have to use that option like JPST did. My guess is that FCONX holds more cash-like securities in terms of liquidity.

Both are good funds, it just depends on the specifics of where you broker, and how you will use it.

Thank you,

Holiday

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

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@retired99 wrote:

Vanguard ultra-short term bond fund VUSFX/VUBFX has no corresponding ETF, correct?  I assume that the closest Vanguard ETF that matches VUSFX/VUBFX is BSV (short term bond)?


There is no ultra-short-term ETF by Vanguard so far. But there are others, ICSH, JPST, MINT.

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

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I've been very happy with MINT over the last few years, but ICSH does look appealing - I'll keep it in mind for the future.  Thanks all for the analysis!

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

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Holiday, my post was in reaction to Gary's post, that amount of yield equals the amount of risk.  I do not agree with that statement and I attempted to show 2 funds with the same yield, having very different risk components.  Apparently you agree with my statement, based on your very extensive post.  Consistent with the Original Post by Fred, I indicated in an earlier post to Fred, that there are several funds that might meet his needs, including VFUSX.  I personally use SWSBX for that role in my portfolio, but yield had nothing to do with that selection.

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@dtconroe wrote:

[...] Consistent with the Original Post by Fred, I indicated in an earlier post to Fred, that there are several funds that might meet his needs, including VFUSX.  I personally use SWSBX for that role in my portfolio, but yield had nothing to do with that selection.


 

After much back and forth, I have finally pulled the proverbial trigger today and allocated my 60% cash/MM as follows:

- ICSH @ 15% ("cash substitute"),

- PPVFX @ 15%,

- IBFFX @ 15%,

- SAMFX @ 10%,

- ANBEX added an additional 5% to existing position.

 Decided not to invest in BSV, as I originally posted, because when it comes to bond funds I feel more comfortable with an actively managed fund. But, still staying away from funds with significant exposure to corporate and municipal bonds, at this time. ANBEX (thanks, FD) is an exception based on its outstanding risk/reward record that still puzzles me.

In the meantime, trying to stick to my conservative investment philosophy in this pandemic induced recession/depression. The United States economy is in a “downturn without modern precedent,” Fed chair Powell said, a few hours after government data showed that another 2.4 million people filed new unemployment claims last week. Hence, there is currently no room for equity or balanced funds in my retirement portfolio until I have a better sense of what the "new normal" might be.

Again, appreciate all the very helpful comments and suggestions. In the end, a very worthwhile and rewarding exercise.

Thanks and good luck,

Fred

 

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

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@Holiday wrote:

Hi FD,

 

JSPT did indeed recover faster.  I think it's problems may have been not having enough liquidity (like treasury bonds) to cover the unexpected demand for redemptions.

FCONX works for me because I am a Fidelity Customer, and it is my "cash" holding for my Fidelity OEF allocation which trade at the end of the business day.  I can choose "sell dollars and use the proceeds to buy another fund" and both transactions execute at the close.  Also, FCONX has no round-trip restrictions.  I can buy from it in one transaction and sell into it with another on the same day.

From the FCONX prospectus:

The fund generally invests in liquid money market and short-duration debt securities and the Adviser anticipates that shareholders may purchase and sell shares of the fund frequently. Accordingly, the Board of Trustees has not adopted policies and procedures designed to discourage excessive trading of fund shares and the fund accommodates frequent trading.

The fund has no limit on purchase or exchange transactions but may in its discretion restrict, reject, or cancel any purchases that, in the Adviser's opinion, may be disruptive to the management of the fund or otherwise not be in the fund's interests.

So, FCONX has the same disclaimer that would allow them to reject redemption requests that JSPT does, but did not have to use that option like JPST did. My guess is that FCONX holds more cash-like securities in terms of liquidity.

Both are good funds, it just depends on the specifics of where you broker, and how you will use it.

Thank you,

Holiday


Did JPST had problems with redemptions?

It's nice to know that Fidelity has no restrictions with FCONX because in the past they did when I used FXAIX.  In the last 2 months I used FAGIX twice and as expected I got a warning.

At Schwab, I used their Schwab SP500=SWPPX several times with no problem.  I also use SWNTX=SCHWAB TAX-FREE BOND FUND which is a typical intermediate-term Muni fund many times annually for any leftover (I have zero cash) when I trade.  I use this Muni fund in all accounts, including IRA.  In fact, I love Munis so much in the last couple of years that I use Muni funds in my IRA.  As expected, Fidelity will not let you buy most/all Muni funds in IRAs. I know Fidelity very well, I have an account there for over 20 years but transfer almost all to Schwab because they have several restrictions not found in other places.

For me as a trader the most annoying is the following:  I'm fully invested in mutual funds in my IRA.  If I want to buy QQQ, which is one of my favorites, I must have cash at Fidelity but I want to be fully invested.  At Schwab, I just buy QQQ and on the same day I must sell my mutual funds to cover the exact amount.

JPST breakdown below.  They have 14.7% in cash/cash-equivalent

jpst.PNG

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

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For any Calif residents who like Muni funds like FD does, check out VCITX and FCTFX.  You get Fed and State tax free with these.  

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

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@dtconroe wrote:

Holiday, my post was in reaction to Gary's post, that amount of yield equals the amount of risk.  I do not agree with that statement and I attempted to show 2 funds with the same yield, having very different risk components.  Apparently you agree with my statement, based on your very extensive post.  Consistent with the Original Post by Fred, I indicated in an earlier post to Fred, that there are several funds that might meet his needs, including VFUSX.  I personally use SWSBX for that role in my portfolio, but yield had nothing to do with that selection.

 


dt, another example might be SWNTX with a credit quality of A and NOITX with a credit quality of AA. The current yield on the former is 1.57%. The latter 2.05%. I expect this will change in the near future, but this is the picture today.

Hootz

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

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Hi FD,

Sorry, but I don't understand what this means:

FD said:

It's nice to know that Fidelity has no restrictions with FCONX because in the past they did when I used FXAIX.  In the last 2 months I used FAGIX twice and as expected I got a warning.

From the FXAIX and FAGIX prospectus:

Excessive Trading Policy

The Board of Trustees has adopted policies designed to discourage excessive trading of fund shares. Excessive trading activity in a fund is measured by the number of roundtrip transactions in a shareholder's account and each class of a multiple class fund is treated separately. A roundtrip transaction occurs when a shareholder sells fund shares (including exchanges) within 30 days of the purchase date.

Shareholders with two or more roundtrip transactions in a single fund within a rolling 90-day period will be blocked from making additional purchases or exchange purchases of the fund for 85 days.

Each mutual fund has it's own excessive trading policy which must be observed.  FCONX simply makes it easy to do multiple transactions that process at the close of the same business day. But, if either of the funds in the trade are outside the bounds of policy criteria, then you will get a warning or worse. 

You may have missed the JPST belly flop, but it was not alone. The entire ultra-short sector faced liquidity issues.  JPST just needed to stop trading in order to stop the damage.

Thank you,

Holiday

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

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@FD1001 wrote:

@VA-Tech wrote:

@FD1001 wrote:


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. 

Umm ... a fund like SEMMX should NEVER have been touted as a cash-sub. NEVER, on any planet, in any macro-economic environment! It isn't a cash-sub if it has to be closely monitored by the investor to avoid huge downside performance OR if it moves in lock-step with equity or bond sector performance. The entire point of cash and cash-equivalents is to insulate your exposure risk to other assets or to park money for tactical opportunities or expense commitments.

FD, I realize you can't own failure so I don't expect this to influence your own investing behavior but it might serve as a warning to those who might try to follow your preaching.


I never said it's a cash sub it was clearly defined many times  "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. 

...

So, unless you know what you are doing please don't take advice from anybody on the internet. I don't care if you or anybody else pay attention or not, after all, it's free and for entertainment. 


IMO, what you wrote above (bolded in BLUE) should added to the bottom of almost every post you make. You could fancy it up and bit and perhaps use words similar to the Federal Cigarette Labeling and Advertising Act of 1965 which required that the warning “Caution: Cigarette Smoking May Be Hazardous to Your Health” be placed in small print on one of the side panels of each cigarette package. Obviously, we're talking Financial Health in this case, but you get the point!

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

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@Holiday wrote:

Hi FD,

Sorry, but I don't understand what this means:

FD said:

It's nice to know that Fidelity has no restrictions with FCONX because in the past they did when I used FXAIX.  In the last 2 months I used FAGIX twice and as expected I got a warning.

From the FXAIX and FAGIX prospectus:

Excessive Trading Policy

The Board of Trustees has adopted policies designed to discourage excessive trading of fund shares. Excessive trading activity in a fund is measured by the number of roundtrip transactions in a shareholder's account and each class of a multiple class fund is treated separately. A roundtrip transaction occurs when a shareholder sells fund shares (including exchanges) within 30 days of the purchase date.

Shareholders with two or more roundtrip transactions in a single fund within a rolling 90-day period will be blocked from making additional purchases or exchange purchases of the fund for 85 days.

Each mutual fund has it's own excessive trading policy which must be observed.  FCONX simply makes it easy to do multiple transactions that process at the close of the same business day. But, if either of the funds in the trade are outside the bounds of policy criteria, then you will get a warning or worse. 

You may have missed the JPST belly flop, but it was not alone. The entire ultra-short sector faced liquidity issues.  JPST just needed to stop trading in order to stop the damage.

Thank you,

Holiday


Pretty easy to understand, every fund that I traded at Schwab which were bond + stocks indexes Traded in/oot within days with no restrictions while you can't do it with most/all Fidelity stocks+bonds. FCONX is the exception, I'm not going to check each fund at both brokers.  I gave you another easy trade that Fidelity will not let you execute (buy ETF in IRA when your account is fully invested).  Fidelity restrictions go beyond Schwab, please address this.

It's good to know that JPST and others may have liquidity issues but it's a known issue, in severe cases even MM can have the same problem. Example for VMMXX which is an excellent choice from VG "The fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the fund's liquidity falls below required minimums because of market conditions or other factors"  Basically, you need to be aware of markets and what to do in certain situation.  When I invested in MM several weeks ago I selected Gov MM.

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

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@VA-Tech wrote:

@FD1001 wrote:

@VA-Tech wrote:

@FD1001 wrote:


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. 

Umm ... a fund like SEMMX should NEVER have been touted as a cash-sub. NEVER, on any planet, in any macro-economic environment! It isn't a cash-sub if it has to be closely monitored by the investor to avoid huge downside performance OR if it moves in lock-step with equity or bond sector performance. The entire point of cash and cash-equivalents is to insulate your exposure risk to other assets or to park money for tactical opportunities or expense commitments.

FD, I realize you can't own failure so I don't expect this to influence your own investing behavior but it might serve as a warning to those who might try to follow your preaching.


I never said it's a cash sub it was clearly defined many times  "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. 

...

So, unless you know what you are doing please don't take advice from anybody on the internet. I don't care if you or anybody else pay attention or not, after all, it's free and for entertainment. 


IMO, what you wrote above (bolded in BLUE) should added to the bottom of almost every post you make. You could fancy it up and bit and perhaps use words similar to the Federal Cigarette Labeling and Advertising Act of 1965 which required that the warning “Caution: Cigarette Smoking May Be Hazardous to Your Health” be placed in small print on one of the side panels of each cigarette package. Obviously, we're talking Financial Health in this case, but you get the point!


First, you are not my boss and I shouldn't do anything to please you.  

Second, free and anonymous on the internet means you should do your own due diligence but COMMON SENSE IS NOT COMMON. 

Third, the best thing you can do is stop complaining and post your thoughts and analysis.

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

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Schwab started and is more of a brokerage than Fidelity. Fidelity can't get past the old mutual fund ideology that one buys them and holds for life it sounds like.


@FD1001 wrote:     ……....  Pretty easy to understand, every fund that I traded at Schwab which were bond + stocks indexes Traded in/oot within days with no restrictions while you can't do it with most/all Fidelity stocks+bonds. FCONX is the exception, I'm not going to check each fund at both brokers.  I gave you another easy trade that Fidelity will not let you execute (buy ETF in IRA when your account is fully invested).  Fidelity restrictions go beyond Schwab, please address this.

It's good to know that JPST and others may have liquidity issues but it's a known issue, in severe cases even MM can have the same problem. Example for VMMXX which is an excellent choice from VG "The fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the fund's liquidity falls below required minimums because of market conditions or other factors"  Basically, you need to be aware of markets and what to do in certain situation.  When I invested in MM several weeks ago I selected Gov MM.


 

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