Author Topic: Where is the best place to put cash these days besides a Money Market?  (Read 7200 times)

Unionville

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I get almost no interest on money market accounts and CD's these days.  I have a large stash of cash I want to keep available (which is about 10% of my portfolio) just in case something unexpected happens and I need it. It's my security blanket. I was thinking of something that is a step up from a CD or money market that is not very volatile.

Any ideas? I looked an muni bonds, but I'm not sure if I want it tied up for 2 years, and the bond funds actually lost money last year.

Saverocity

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How much cash? What ROI would you accept?

And for giggles - what is your travel (flight) expense per year?

Nords

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I get almost no interest on money market accounts and CD's these days.  I have a large stash of cash I want to keep available (which is about 10% of my portfolio) just in case something unexpected happens and I need it. It's my security blanket. I was thinking of something that is a step up from a CD or money market that is not very volatile.
If you're not willing to risk an occasional loss from a short-term bond fund then you should try CDs with terms of 3-7 years. 

Because you're concerned about volatility yet still trying to chase yield, I'll mention something that I usually would not recommend:  Vanguard's Wellington or Wellesley mutual funds.  If your research makes you go "Yeah, but--" then you should try... CDs with terms of 3-7 years.

mjs111

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I'd say if this is short term cash (cash you might need in 1-2 years) and you want it to act like a security blanket, don't chase yield.  At the moment there's not much (none that I know of) available that yields well, is liquid, and principal-safe over a 1-2 year period.

In some ways I look at the cash in my Capital One 360 account (which is relatively high yield) as a call option on future opportunities.  That cash will always be there and can be moved very quickly.  That in itself is valuable.

Mike


Gimesalot

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As others have noted, yields are low right now.

I keep my short term saving at Smartypig.  It is very childish looking, but I have had accounts there for over 5 years without any trouble.  Interest is 1% and withdrawals take 3 days.

Thegoblinchief

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Everything sucks from a yield perspective. I do Capital One 360, but I keep a pretty small e-fund. If shit really hit the fan, I'd pull back on prepayment of debt and use the positive cash flow to right ship.

How much cash do you really need? Personally, I'd invest it, knowing that if a major downturn happened, I'd just delay my plans for it until principal had recovered.

TreeTired

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I have some cash in Duke Energy Premierenotes  (Google will take you to their website).  It is basically buying commercial paper but with no stated maturity.  Pays around 1.4% which is better than .04%.   NOT risk free; you become an unsecured creditor of Duke Energy.  They give you a checkbook and you can wire money in and out.   I wouldn't put all my money in there, but it's worth an allocation.

thepokercab

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Basically agree with everyone here about chasing yield.  If its for short term use, probably makes sense to just keep it easily accessible in a checking/savings account.  I'm saving for a down payment that I plan to use in the next year- i keep mine in an online American Express savings account that earns 0.8%

nicknageli

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Maybe consider doing the math on what a 5-year CD would pay and what the penalty would be for breaking it.  Right now I only earn .3% in a money market, but a local credit union is offering a 2.20% APY 5-year CD.  Even with a 6-month interest penalty for withdrawing early, it wouldn't take me too many months to surpass what I'm getting in the money market.

mh1361

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I use a "high" yield savings account. You might want to look into Betterment. Jim Collins recommends them for short-term goals. I haven't used them so I can't speak from experience on how useful it is.

brewer12345

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Re: Where is the best place to put cash these days besides a Money Market?
« Reply #10 on: March 18, 2014, 10:06:36 AM »
5 year CDs with no more than a 6 months of interest penalty is what I have been using for many years.  Another alternative is to buy some I bonds.  I have both plus some loose change in a money market fund.

nicknageli

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Re: Where is the best place to put cash these days besides a Money Market?
« Reply #11 on: March 18, 2014, 10:16:00 AM »
Here is some info on the two Vanguard funds that Nords mentioned.


Vanguard Wellington Fund Admiral Shares (VWENX)
"Investors with a long-term time horizon who want growth and are willing to accept stock market volatility may wish to consider this as a core holding in their portfolio."
Expenses  .17%

Vanguard Wellesley Income Fund Admiral Shares (VWIAX)
"Investors with a medium- or long-term time horizon who have a goal of steady income and who are willing to accept modest movement in share price may wish to consider this fund as a core holding in their portfolio."
Expenses  .18%

Another Reader

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Re: Where is the best place to put cash these days besides a Money Market?
« Reply #12 on: March 18, 2014, 10:50:56 AM »
Not so sure about the "modest movement in share price" in Wellesley when interest rates go up....  I do have money in Wellington, but it's not money I expect to need anytime soon.  CD's, I-bonds, high yield savings and a rewards checking account are my go-to accounts for short term and emergency cash.

Unionville

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Re: Where is the best place to put cash these days besides a Money Market?
« Reply #13 on: March 18, 2014, 06:36:22 PM »
Not so sure about the "modest movement in share price" in Wellesley when interest rates go up....  I do have money in Wellington, but it's not money I expect to need anytime soon.  CD's, I-bonds, high yield savings and a rewards checking account are my go-to accounts for short term and emergency cash.

What rewards checking accounts do you recommend?  What are the rewards?

Stache In Training

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Re: Where is the best place to put cash these days besides a Money Market?
« Reply #14 on: March 18, 2014, 09:26:23 PM »
I agree with the people simply suggesting a high-yield savings and rewards checking account.  You don't have any worries about accessing money, and basically the same ROI.  I use CapitalOne360 banking for my short term reserve needs.  The checking is .20% for 49,999 and under, and .80% for 50,000 and over, and .85% at over 100,000.  The savings account is .75%, period. 

.75% is better than pretty much any CD's I could ever find, unless it was over 5 years.  (I don't want to lock my cash away for that long.)  But you'll never have any early-withdrawal fees.  Which is what I like.  Their customer service is excellent; I've never had any problems, and literally every service is free to use, and easy too.  If you want more info, just ask.

If you want to use them, here's my refer a friend link: https://r.capitalone360.com/fvMaBF6sbX  If you open with $250 or more, you'll get $20 and so will I!  However, don't feel like I'm pushing you towards my link.  In fact, if you search on the MMM blog, he has (or at least used to have) an even better sign-on bonus.  Either way, I suggest using a sign-on bonus, because FREE MONEY!

Another Reader

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Re: Where is the best place to put cash these days besides a Money Market?
« Reply #15 on: March 18, 2014, 10:21:53 PM »
Check www.depositaccounts.com for rewards checking accounts in your area.  Most are offered by credit unions, which have varying criteria to join.  Out here, Provident pays 1.76 percent on balances up to $25k with 10 debit card transactions and one direct deposit/ACH transaction per month.  Someone mentioned Lake Michigan CU, which is even better if you can meet the requirements to join.

nicknageli

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Re: Where is the best place to put cash these days besides a Money Market?
« Reply #16 on: March 19, 2014, 11:44:52 AM »
I had to cash out of a 5-year CD early.  The credit union agreed to drop the penalty from 6-months of interest to 3-months.  I also was able to deduct the 3-month penalty as a loss on taxes.  I still made out better than if I'd just done a regular money market account.  The penalty still stung a little.  : (

the fixer

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Re: Where is the best place to put cash these days besides a Money Market?
« Reply #17 on: March 19, 2014, 01:10:47 PM »
I agree that long-term CDs with a reasonable withdrawal "penalty" or a rewards checking account are the best low-risk options. I have a rewards checking account that pays ~3% on up to $20k in exchange for using bill pay once per month, signing in to online banking once per month, and making 12 debit card transactions of $3 or more per month. The only catch is you need to follow the rules to get the interest; there's no prompting or other help you'll get from the bank to ensure you meet the requirements that month, and it can be easy to miss a transaction one month and lose out on ~$50 of interest.