Investment guys, alternatives for cash? (1 Viewer)

[TxBuckeye]

We have done well saving up the recommended six months of living expenses. But right now, our cash is just that, cash. Sitting in a savings account earning literally nothing. I am looking at laddering some CDs as an alternative to the bank. But rates are somewhat crappy. The best I have found is 2.25% for a five year CD from Barclay's.

What are other alternatives folks use for cash? It has to be something I can access in an emergency obviously with little to no penalty, which is why I am looking at the CDs. You basically give the interest back if you need the cash and that is pretty much it. But are their other, better options out there?

 

[humpback]

Nope. You can get close to 1% with some online savings/checking accounts, maybe even over with a temporary "bonus" rate, but that's about it. Don't expect it to change anytime soon either.

 

[eoMMan]

My Capital One MM savings account pays 0.50%. I can transfer money between it and my BOA checking (take a few days though) and I have debit card for the savings account if I want to pull money out.

Regarding the CD, make sure you read up on any penalties for pulling your money out early. 2.25% isn't much and your money is locked in for 5 years.

 

[PinkydaPimp]

What about Laddering govt ibonds? 1.38%

 

[Miscellaneous]

My CU gives 1.76% on my checking... Everything else is in the brokerage account.

 

[TxBuckeye]

My CU gives 1.76% on my checking... Everything else is in the brokerage account.

Mine is .05%, so not really an option. Savings in .20%, so still crap. 1.76% is honestly insane. I haven't heard of any bank or CU with rates like that. What CU do you use??

 

[TxBuckeye]

My Capital One MM savings account pays 0.50%. I can transfer money between it and my BOA checking (take a few days though) and I have debit card for the savings account if I want to pull money out.

Regarding the CD, make sure you read up on any penalties for pulling your money out early. 2.25% isn't much and your money is locked in for 5 years.

It's up to six months interest. So, like I said in the original post, you would basically lose any interest you earned. In an emergency, and compared to the interest it is earning now, not much of a penalty at all.

 

[Miscellaneous]

My CU gives 1.76% on my checking... Everything else is in the brokerage account.

Mine is .05%, so not really an option. Savings in .20%, so still crap. 1.76% is honestly insane. I haven't heard of any bank or CU with rates like that. What CU do you use??

Provident in CA. 1.76% super reward checking. When we opened the account in 2007, THAT was a ridiculous rate.

 

[Andrew74]

My bank pays 2% on checking acct up to $20k. The kicker is you have to use your debit card 15x month. Many banks/CUs have this program around here.

The other option is the online bank. I have some cash in Amex online savings acct - pays 0.80%.

If you want to take risk you can do some fixed maturity corp ETFs like the BulletShares. These do help reduce rate risk vs traditional short ETFs.

There really aren't good options.

 

[Doctor Detroit]

I bury rare coins in my relatives' yards.

 

[luvugheys]

We have done well saving up the recommended six months of living expenses. But right now, our cash is just that, cash. Sitting in a savings account earning literally nothing. I am looking at laddering some CDs as an alternative to the bank. But rates are somewhat crappy. The best I have found is 2.25% for a five year CD from Barclay's.

What are other alternatives folks use for cash? It has to be something I can access in an emergency obviously with little to no penalty, which is why I am looking at the CDs. You basically give the interest back if you need the cash and that is pretty much it. But are their other, better options out there?

Are you looking for something you can access quickly in case of an emergency? It seems the answer is yes and you don't want paper money for whatever reason.

SIlver or gold coins? I'm leaning silver right now. I think it is a good buy at this price and the next global economic shake up money will flow back to physical commodities and the price will go up. Worst case you have something that has retained a value for centuries.

 

[pecorino]

Some folks are against this, but I'd put that money in a Roth IRA. You can get at the principal at any time without penalty and you have a wide range of investment options open to you.

 

[Andrew74]

We have done well saving up the recommended six months of living expenses. But right now, our cash is just that, cash. Sitting in a savings account earning literally nothing. I am looking at laddering some CDs as an alternative to the bank. But rates are somewhat crappy. The best I have found is 2.25% for a five year CD from Barclay's.

What are other alternatives folks use for cash? It has to be something I can access in an emergency obviously with little to no penalty, which is why I am looking at the CDs. You basically give the interest back if you need the cash and that is pretty much it. But are their other, better options out there?

Are you looking for something you can access quickly in case of an emergency? It seems the answer is yes and you don't want paper money for whatever reason.

SIlver or gold coins? I'm leaning silver right now. I think it is a good buy at this price and the next global economic shake up money will flow back to physical commodities and the price will go up. Worst case you have something that has retained a value for centuries.

No way I'd put my cash reserve in gold/silver. Way too much price risk.

 

[stubby]

http://performance.morningstar.com/fund/performance-return.action?t=PRFSX&region=usa&culture=en-US

 

[ghostguy123]

Anything worth putting about 50k into for one year, or would it be a waste of time.

I do at least get SOMETHING in my savings account, like 10 bucks a month. Yayy

 

[Mario Kart]

Are you looking for something you can access quickly in case of an emergency? It seems the answer is yes and you don't want paper money for whatever reason.

SIlver or gold coins? I'm leaning silver right now. I think it is a good buy at this price and the next global economic shake up money will flow back to physical commodities and the price will go up. Worst case you have something that has retained a value for centuries.

How much over spot do coin shops typically sell silver/gold bullion? Coins have a higher cost but what about bars, rounds?

 

[King of the Jungle]

Some folks are against this, but I'd put that money in a Roth IRA. You can get at the principal at any time without penalty and you have a wide range of investment options open to you.

How do you put a lump some from a taxable account into a Roth IRA?

 

[Andrew74]

Are you looking for something you can access quickly in case of an emergency? It seems the answer is yes and you don't want paper money for whatever reason.

SIlver or gold coins? I'm leaning silver right now. I think it is a good buy at this price and the next global economic shake up money will flow back to physical commodities and the price will go up. Worst case you have something that has retained a value for centuries.

How much over spot do coin shops typically sell silver/gold bullion? Coins have a higher cost but what about bars, rounds?

At best I'd say you'd pay 3%-5% over spot. Could be more. The smaller the bar, the bigger the premium.

 

[TxBuckeye]

Some folks are against this, but I'd put that money in a Roth IRA. You can get at the principal at any time without penalty and you have a wide range of investment options open to you.

Retirement accounts for both wife and I are already maxed out, so not an option.

 

[jamny]

I think it's a good time to put some money into some value stocks. More money will flow in from the growth stocks as people look for a safer investment over the next year or so.

 

[TxBuckeye]

I don't think the six month cash reserve is supposed to be in stocks. In that case, it isn't cash, it's an investment. Unless I'm missing something?

 

[Vincesanity]

AT&T stock is an option, it moves very little and pays a 5.6% dividend.

 

[Vincesanity]

I'd personally just leave it in savings since it's an emergency fund.

 

[swirvenirvin]

We use discoverbank which is an online acct and pays .85%

 

[Andrew74]

AT&T stock is an option, it moves very little and pays a 5.6% dividend.

Over the last 52 weeks it's range is an 18%+ band (unfortunately down). While not huge for a stock, probably not the best for a cash reserve.

 

[swirvenirvin]

AT&T stock is an option, it moves very little and pays a 5.6% dividend.

down 6.5% over last year

 

[Vincesanity]

Good time to buy in

 

[Vincesanity]

Could split it up, keep 3 months in savings and 3 months in a mutual fund like Franklin Income Builder.

 

[pecorino]

Some folks are against this, but I'd put that money in a Roth IRA. You can get at the principal at any time without penalty and you have a wide range of investment options open to you.

How do you put a lump some from a taxable account into a Roth IRA?

if you already paid taxes on the money, you can open a Roth IRA with some investment company like TIAA CREF or Schwab or whatever. just write them a check. if your money is in a tax-deferred account then any amount moved into a Roth is taxable so consult your tax advisor (or do it yourself) to determine how much you can afford to convert to after-tax savings.

and for the poster who said putting your cash savings into a (presumably equities-heavy) Roth is an investment not savings, that is correct. that's why some folks are against it. but personally I can't sit idly by and watch my cash lose value to inflation.

 

[mr roboto]

We have some money in non-public funds like Franklin Square and a Griffin Medical REIT. Both pay a dividend and we roll the proceeds to more shares. Could liquidate with penalty but they do go public at some point and are tradable.

 

[Dentist]

unfortunately i think anything riskier than a cd is a poor chase of yield. if you want some ideas about your next 6 months of cash laying around though, i've got a few.

are you someone that truly needs 6 mo? if you have low volatility if your job and are a fairly low debt person you could probably get by with 3 mo. in pure cash and 3 mo in an investment where you take some risk like a corporate bond etf or preferred stock etf

 

[fourd]

Some folks are against this, but I'd put that money in a Roth IRA. You can get at the principal at any time without penalty and you have a wide range of investment options open to you.

How do you put a lump some from a taxable account into a Roth IRA?

if you already paid taxes on the money, you can open a Roth IRA with some investment company like TIAA CREF or Schwab or whatever. just write them a check. if your money is in a tax-deferred account then any amount moved into a Roth is taxable so consult your tax advisor (or do it yourself) to determine how much you can afford to convert to after-tax savings.

and for the poster who said putting your cash savings into a (presumably equities-heavy) Roth is an investment not savings, that is correct. that's why some folks are against it. but personally I can't sit idly by and watch my cash lose value to inflation.

So you've traded inflation risk for risk of principal. Which isn't really what you want to do with an emergency fund.

 

[pecorino]

Yes, that is correct. But historically inflation is a near certainty and, in the long run, equities outpace it. Sure, a badly timed market drop coinciding with a need to liquidate would be bad. Not for everybody, like I said. Personally I'll take that gamble.

 

[Jayrod]

unfortunately i think anything riskier than a cd is a poor chase of yield. if you want some ideas about your next 6 months of cash laying around though, i've got a few.

are you someone that truly needs 6 mo? if you have low volatility if your job and are a fairly low debt person you could probably get by with 3 mo. in pure cash and 3 mo in an investment where you take some risk like a corporate bond etf or preferred stock etf

This is exactly my thoughts on it.

Don't sit on that much cash. It isn't like etf's aren't liquid...the only true downside is the loss risk, but it isn't like the account would just plummet to zero and in the meantime, you could earn some decent returns.

 

[T Love]

unfortunately i think anything riskier than a cd is a poor chase of yield. if you want some ideas about your next 6 months of cash laying around though, i've got a few.

are you someone that truly needs 6 mo? if you have low volatility if your job and are a fairly low debt person you could probably get by with 3 mo. in pure cash and 3 mo in an investment where you take some risk like a corporate bond etf or preferred stock etf

What are some of your thoughts on places to take minor risks on "emergency fund" cash once you have the first three months accounted for?

 

[Jayrod]

unfortunately i think anything riskier than a cd is a poor chase of yield. if you want some ideas about your next 6 months of cash laying around though, i've got a few.

are you someone that truly needs 6 mo? if you have low volatility if your job and are a fairly low debt person you could probably get by with 3 mo. in pure cash and 3 mo in an investment where you take some risk like a corporate bond etf or preferred stock etf

What are some of your thoughts on places to take minor risks on "emergency fund" cash once you have the first three months accounted for?

Just going out on a limb here, but i think corporate bond etf or preferred stock etf would be a good idea.

 

[Andrew74]

unfortunately i think anything riskier than a cd is a poor chase of yield. if you want some ideas about your next 6 months of cash laying around though, i've got a few.

are you someone that truly needs 6 mo? if you have low volatility if your job and are a fairly low debt person you could probably get by with 3 mo. in pure cash and 3 mo in an investment where you take some risk like a corporate bond etf or preferred stock etf

What are some of your thoughts on places to take minor risks on "emergency fund" cash once you have the first three months accounted for?

Just going out on a limb here, but i think corporate bond etf or preferred stock etf would be a good idea.

I'd stay short currently. SJNK on high yield, CSJ on invest grade. The BulletShares ETF series aren't bad. You can build a ladder with those. I'm not up to speed on all the Pfd stock ETFs, but I'd be worried about duration there.

 

[Juxtatarot]

Emergency funds should be liquid and risk free. Seems like a lot of you guys disagree.

These days online accounts getting about .7% is about the best you can do.

 

[Jayrod]

Emergency funds should be liquid and risk free. Seems like a lot of you guys disagree.

These days online accounts getting about .7% is about the best you can do.

1-3 month fund? Absolutely kept in cash with as little risk as possible. 4-6 month funds? Can take a bit more risk and make a little return. That is unless you are in a field where there is a realistic chance that you could be completely out of work for more than 3 months.

 

[fantasycurse42]

Magnets

 

[Juxtatarot]

Emergency funds should be liquid and risk free. Seems like a lot of you guys disagree.

These days online accounts getting about .7% is about the best you can do.

1-3 month fund? Absolutely kept in cash with as little risk as possible. 4-6 month funds? Can take a bit more risk and make a little return. That is unless you are in a field where there is a realistic chance that you could be completely out of work for more than 3 months.

Emergency funds should be viewed as forever.

 

[Jayrod]

Emergency funds should be liquid and risk free. Seems like a lot of you guys disagree.

These days online accounts getting about .7% is about the best you can do.

1-3 month fund? Absolutely kept in cash with as little risk as possible. 4-6 month funds? Can take a bit more risk and make a little return. That is unless you are in a field where there is a realistic chance that you could be completely out of work for more than 3 months.

Emergency funds should be viewed as forever.

No such thing.

 

[Juxtatarot]

Emergency funds should be liquid and risk free. Seems like a lot of you guys disagree.

These days online accounts getting about .7% is about the best you can do.

1-3 month fund? Absolutely kept in cash with as little risk as possible. 4-6 month funds? Can take a bit more risk and make a little return. That is unless you are in a field where there is a realistic chance that you could be completely out of work for more than 3 months.

Emergency funds should be viewed as forever.

No such thing.

As what? forever? I don't think that practically matters.

 

[Jayrod]

Emergency funds should be liquid and risk free. Seems like a lot of you guys disagree.

These days online accounts getting about .7% is about the best you can do.

1-3 month fund? Absolutely kept in cash with as little risk as possible. 4-6 month funds? Can take a bit more risk and make a little return. That is unless you are in a field where there is a realistic chance that you could be completely out of work for more than 3 months.

Emergency funds should be viewed as forever.

No such thing.

As what? forever? I don't think that practically matters.

I mean there is no such thing as a perfectly safe place for money, only degrees of risk.

 

[Juxtatarot]

Emergency funds should be liquid and risk free. Seems like a lot of you guys disagree.

These days online accounts getting about .7% is about the best you can do.

1-3 month fund? Absolutely kept in cash with as little risk as possible. 4-6 month funds? Can take a bit more risk and make a little return. That is unless you are in a field where there is a realistic chance that you could be completely out of work for more than 3 months.

Emergency funds should be viewed as forever.

No such thing.

As what? forever? I don't think that practically matters.

I mean there is no such thing as a perfectly safe place for money, only degrees of risk.

If we are referring to a 100% guarantee of principal, a US government guarantee is good enough for me.

 

[Jayrod]

Emergency funds should be liquid and risk free. Seems like a lot of you guys disagree.

These days online accounts getting about .7% is about the best you can do.

1-3 month fund? Absolutely kept in cash with as little risk as possible. 4-6 month funds? Can take a bit more risk and make a little return. That is unless you are in a field where there is a realistic chance that you could be completely out of work for more than 3 months.

Emergency funds should be viewed as forever.

No such thing.

As what? forever? I don't think that practically matters.

I mean there is no such thing as a perfectly safe place for money, only degrees of risk.

If we are referring to a 100% guarantee of principal, a US government guarantee is good enough for me.

Even they can't stop inflation risk.

6 months of expenses today is no guarantee the same amount is 6 months of expenses tomorrow.

 

[Juxtatarot]

Emergency funds should be liquid and risk free. Seems like a lot of you guys disagree.

These days online accounts getting about .7% is about the best you can do.

1-3 month fund? Absolutely kept in cash with as little risk as possible. 4-6 month funds? Can take a bit more risk and make a little return. That is unless you are in a field where there is a realistic chance that you could be completely out of work for more than 3 months.

Emergency funds should be viewed as forever.

No such thing.

As what? forever? I don't think that practically matters.

I mean there is no such thing as a perfectly safe place for money, only degrees of risk.

If we are referring to a 100% guarantee of principal, a US government guarantee is good enough for me.

Even they can't stop inflation risk.6 months of expenses today is no guarantee the same amount is 6 months of expenses tomorrow.

If there is one thing the Fed has done well over the last 20 years, it's keeping inflation low. Sure, your average savings account won't keep up with inflation but I don't think that really matters for the purpose of an emergency fund.