The returns for 'near cash' bond and derivatives funds and vehicles of less than two year's duration are minimal. After reviewing the actual holdings of many of these funds, the conclusion was that the return does not reward the risk. This is also true for money market funds at this time.
Also there is the loomimg question of simple safety. Brokerages have SIPC insurance for clients, but imagine a huge failure of your broker or trustee with potential delays and perhaps "bail-ins" of my or your account. I have considered buying brokered Certificates of Deposit which carry FDIC coverage, but the banks offering them at many brokerages are not household names and sizes of certificates are a problem.
I have looked at Charles Schwab's website and read a lot about their Schwab Bank accounts linked to brokerage accounts wherein idle cash is covered up to limits of FDIC insurance, or $250,000 per retirement account and multiples thereof for joint accounts or trust accounts. I think these would be good for some trading accounts since cash is swept in and out of the bank account as needed.
But, moving brokerage accounts to a new space is always a hassle and results in a lot of accounting and tax time and fees. Plus I am satisfied in general with Vanguard funds and Vanguard brokerage. So instead of moving I have been cashing out of the near cash vehicles on days, like Friday April 4, 2014, when interest rates drop and notes and bonds rise. Then I am laddering 1-3 month US TBills through Vanguard's Treasury auction application. One-third of cash will purchase 3 month Tbills once each month for an average 45 days duration, which is less than that of many money market funds. The interest payable is, of course, virtually nil, but one has no real current credit risk, no duration or capital risk, and the best liquidity for selling in the secondary market in case of immediate need. Any interest rate increases will flow straight to the bottom line.
75% of assets will be in this TBill effort plus about 3-5% in Vanguard's EDV, a zero coupon 25-30 year Treasury bond fund to keep just a bit of duration since long term rates look set to fall on both technical and economic grounds. This EDV will require watching.
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The rest of invested funds is vaulted precious metals and shares in ETFs vaulting their gold in Canada, Switzerland, and Singapore and the position in MFLDX long/short stock fund (detailed last month), a gold stock fund, small pieces of commodity funds weighted a bit toward agricultural futures, and a bit of a leveraged short S&P500 ETF (SPXU). If gold drops sharply, I will buy more of it. I do think the dollar could rise along with gold.
This is all about risk avoidance. Governments, economies, and markets all look frightening, and I cannot take the risk given my age and my desire to live and to travel. I am always a humble student of the markets and will change if or when the current picture changes.
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