money market
Written by David, March 14th, 2011
Do you have idle cash languishing in a savings account or money market account earning less than 1%?
If so, you may be missing out on excellent opportunities to achieve both steady income and capital appreciation generated by your hard-earned assets.
The Federal Reserve and banks around the country have dropped the yield on short-term savings and money markets rates to rock bottom levels in an effort to stimulate the economy. Long-term CDs and Treasury bonds don’t give you the flexibility to keep your money liquid, and as such they represent a hazard if interest rates were to rise.
According to recent government data, the inflation rate in the U.S. is close to 1.6%, which means that your purchasing power is diminishing if you are not able to achieve a total return in excess of this baseline. And that’s the official inflation rate, which doesn’t take into account rising food prices and soaring energy costs.
So, what do you do with that cash on the sidelines that’s earning next to nothing?
You put it in an actively managed income portfolio from Fabian Wealth Strategies.
Now more than ever, you need a conservative investment strategy designed to generate monthly income as well as preserve investment capital. At Fabian Wealth Strategies, our Steady Income portfolio is comprised of highly liquid investments with a balanced mix of dividend-producing stocks and investment-grade bonds.
Our proactive approach to asset management allows us to be flexible with the portfolio in the event that interest rates continue rise, or stocks abruptly turn lower. We accomplish this by monitoring our portfolios on a daily basis to determine what we believe is the best asset allocation mix to achieve your income-generating goals.
We welcome your calls at (800) 391-1118 to discuss how we can help you turn your idle cash into an income-generating machine.
Sincerely,
Doug Fabian
President, Fabian Wealth Strategies
—————————————————————————————————–
Fabian Wealth Strategies, Inc. is a registered investment advisor with the U.S. Securities and Exchange Commission. Doug Fabian is a registered investment advisor representative. The information expressed in this email is for educational purposes only and should not be construed as a recommendation to buy, sell, or hold any specific security. Investing involves the risk of loss. Consider the risks, fees, and expenses before making any change to your investment portfolio.
Written by David, April 09th, 2009
I know a lot of readers are committed to having a high cash position during this bear market. So it’s no surprise to me that lately I’ve received a lot of questions regarding cash alternatives. Many of you are understandably not content with the very low rate of return being paid by today’s money market funds.
And while I feel that the money market is the safest, most liquid place to park your serious money during this time of market flux, I do think there are several safe alternatives to your run of the mill money market fund.
One of my favorite money market alternatives is the iShares Barclays 1-3 Year Treasury Bond (SHY). This investment seeks results that correspond generally to the price and yield performance of the short-term sector of the U.S. Treasury market as defined by the Barclays Capital 1-3 Year U.S. Treasury index.
The current yield on SHY is 2.05% as of April 8, 2009, so if you are looking for a good place to get a little more yield than your money market account, check out SHY.
In addition to SHY, there are two other cash alternatives that are worthy of checking out. They are the WisdomTree U.S. Current Income Fund (USY), a fund yielding 0.35%, and the PowerShares VRDO Tax-Free Weekly (PVI), which has a current yield of 1.64%. Both of these decent cash alternatives, although they pale in comparison to SHY in terms of yield.
So, if you are looking to take a little of your money and put it into cash alternatives, here are three solid candidates.
Written by David, November 05th, 2008
Now that the election is in the books, Wall Street can refocus on corporate America’s books. Unfortunately, those books aren’t going to be an uplifting read.
All of the major economic metrics will likely be much lower in the fourth quarter, and that’s following an already dismal third quarter. The unemployment rate will likely continue rising, corporate earnings will probably come in well below expectations, and consumer and capex spending is forecast to be the worst it has been in many years.
These recessionary conditions mean one thing for the market—more bearish sentiment, more selling, and a whole lot more risk baked into the investment cake.
In the midst all of the negativity pervading Wall Street right now, there is one theme common to nearly every mainstream investment advisor out there. That theme is a reluctance to embrace what I call the forgotten asset class—cash.
The chart here of the S&P 500 certainly proves that equities aren’t the place for your serious money. Yet despite the pernicious declines in the market, most advisors are still telling their clients to stay the course.
Look at the table below, which outlines the performance of the major indices throughout multiple time frames.
As you can see, no index has been safe from the mass sell-off that’s hammered so many investors for so long. The real problem here, as I see it, is the column here in yellow. That column shows how far below the all-important, 200-day moving average each respective index is currently trading. The fact that equities are so far below the 200-day average means that it will be a long, long time before it’s safe to go back into the equity waters.
Despite the overwhelmingly negative economic metrics, and despite the current state of the major market averages, most advisors are telling clients they have too much cash in their portfolios.
I recently talked with a client that had over $1 million in cash generated from the sale of a home. She told her broker she wanted to stay conservative with the money, but his first reaction was to sell her some kind of product. He told her cash wasn’t a good place for her money. Instead, he sold her corporate bonds, some of which are now worth only 2 cents on the dollar!
This kind of financial malpractice is a symptom of not wanting to embrace the forgotten asset class of cash. Cash is absolutely king when it comes to surviving a big market downturn, and if you haven’t done so already, I recommend you take a serious look at increasing your cash allocation.
So, why do most mainstream advisors avoid cash? Simple, there’s nothing in it for them.
You see, you can’t charge big fees on cash. You can’t charge a commission on a money market fund, and because a broker doesn’t make any money for himself when you are in cash, there is no incentive for him to recommend you stay there.
Fortunately, I don’t have that incentive. My only incentive is to help you safely navigate this market storm. If your advisor does not want to move you to cash, consider another alternative. Fabian Wealth Strategies actively manages client assets using exchange traded funds. We are now accepting new clients in both our growth and income portfolios. Call 800-391-1118 or visit www.fabianwealth.com for more information.
Written by David, September 18th, 2008
You know that the market’s in trouble when even safe investments aren’t safe anymore.
On Tuesday, we found out that one of the first-ever, largest money market funds put a seven-day freeze on investor redemption’s after the net asset value of its shares fell below $1. Yikes!
This is called “breaking the buck” in the money fund industry, meaning that a dollar just isn’t a dollar anymore. This is exactly what happened in the Primary Fund (RFIXX), managed by New York-based money market fund inventor The Reserve. The company announced late Tuesday that its $785 million holding of Lehman Brothers Holdings debt has been valued at zero. Double yikes!
As of Tuesday’s market close, the value of a Primary Fund share was 97 cents. That’s most-definitely not good when you expect that share to equal $1. News of the Primary Fund’s troubles basically caused a scurry for the exits, evidenced by the fact that at 3 p.m. on Tuesday, Primary Fund’s assets stood at $23 billion, a $40 billion hit from the $62.6 billion in the fund on Friday.
This is only the second time that I can remember a money market fund’s net asset value falling below $1. In 1994, Denver-based Community Bankers U.S. Government Money Market Fund returned 96 cents on the dollar to investors when bad derivatives investments forced it to liquidate. Well, the same thing, in essence, has happened here, and hopefully, this will be an isolated case.
To help assure its customers that their money is safe, some of the largest money-market fund providers already have tried to calm investors in the wake of The Reserve’s revelations.
Fidelity Investments, a company I really like, said that its money market funds are sound. “We can state unequivocally that Fidelity’s money market funds and accounts continue to provide security and safety for our customers’ cash investments,” said Anne Crowley, a Fidelity spokeswoman.
That’s good news, and very reassuring, especially if you are like me, and you have a substantial percentage of your investment portfolio allocated to cash.
The bottom line here is that safe is indeed safe when it comes to most money funds. However, as an investor, it is always your responsibility to make sure you find out what your money fund holds, and to make sure it isn’t about to break the buck.
