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Hi,

I'm interested in learning what to do with cash sitting in several Schwab investment accounts, some taxable, some not.

I read the article in WSJ regarding brokerages, like Schwab, sweeping funds into low-paying bank vehicles, while others, like Fidelity and Vanguard, automatically move them to higher paying money market funds.

During the last few years, I bought a some Ibonds through Treasury Direct, but that's the extent of my experience.

This morning I had an interesting chat with GPT about which cash funds I could purchase through Schwab in my untaxed accounts. They suggested, SWTXX*, SWGXX, SWUXX, SWSBX and SWPXX.

The Schwab website lists the following funds:

Prime Money Funds (Taxed):
SWVXX, SNAXX

Government and Treasury Money Funds (Taxed):
SNVXX, SGUXX, SNOXX, SCOXX, SNSXX, SUTXX

Municipal Money Funds (non-taxable)
SWTXX*, SWOXX, SWKXX, SCAXX, SWYXX, SNYXX, SWWXX, SCTXX, (*SWTXX was the only one listed by GPT)

Variable Share Price Money Funds (Taxed)
SVUXX

So, it looks complicated. Tax, not taxable? Expense ratios, 7-day yield, 30-day yields(?, w or without waivers (?),. Bonds? Treasuries?

I find I am a defensive (!) investor because I know too much and not enough so fear i could get into trouble. I would appreciate knowing a relatively safe place to start with ideas of how i could learn from there. I don't use an investment advisor.

Is it wise to keep my accounts at Schwab or move them to Fidelity and Vanguard? I'm 71, husband is 69, so conserving principle is primary. Still have 55% in stocks like Berkshire and company.


Thanks for any sane suggestions. :)

Elizabeth

Elizabeth, the crucial info is here:
* I'm interested in learning what to do with cash
* I'm 71, husband is 69, so conserving principle is primary.
* Have 55% in stocks like Berkshire and company.

You have most of it worked out, and very important to see the forest rather than the trees here - one might frame the situation as follows: Berkshire is providing the tailwind of value, and you are then wanting invest cash in a way to get (1) the best return (2) without capital loss.

Most of your capital is having the value accumulate in Berkshire - I write 'value' in contrast to the 'quote' which can fluctuate wildly - the value will go up fairly consistently somewhere in the 4%-12% range almost every year. Perhaps you are drawing income from the your cash equivalent part of your savings, in which the larger change in Berkshire quotes don't matter.

For the cash component of your savings, the main insight I could offer is to focus on [2] above (preservation of those savings), and not worry about [1] (the return) so much.

With both bonds and cash equivalents you will not get a good return anyway, no matter what is done. As the yield grows beyond the 10-year bond (presently yielding 3.5%) then you are likely introducing a risk of not having the savings returned at the end of the term.

Getting an extra 2% on your cash/bonds part of your savings is not going to make any noticeable difference to you or anyone around you, but losing all of it would make a difference - so I would treat the cash mainly as preservation of capital, and then enjoy the value accumulation of your 55% of savings within Berkshire.

>Is it wise to keep my accounts at Schwab or move them to Fidelity and Vanguard?

Vanguard has a good reputation, but I doubt it it matters much where the accounts are (?). I presume that they all operate under the same US regulations, so perhaps simply investigate the comparison based on their costs, and move your account where the cost is lower.

- Manlobbi

Thanks for your thoughts, Manlobbi. You've perceived my situation and thoughts, correctly. But I would like to understand treasuries more and things of that nature. Bonds, generally, so I can make my decisions from strength rather than ignorance and contempt prior to investigation.

I did get the Wright book suggested by Charlie Bonds. It looks pretty fun, actually. Well, the Kindle version, which I returned because it didn't include the illustrations and tables. Looking forward to receiving the paperback, next week.

So glad for these these new boards! :)

Hi, Manlobbi,

In light of your earlier post, which I quoted below, do you think it's not worth my time to consider moving an account or two to Vanguard where the money market rate is .61% higher for essentially the same money market as Schwab? The difference between Vanguard's expenses (.09 on 4.55) compared to Schwab's (.26 expenses on 4.20).

"Getting an extra 2% on your cash/bonds part of your savings is not going to make any noticeable difference to you or anyone around you, but losing all of it would make a difference - so I would treat the cash mainly as preservation of capital, and then enjoy the value accumulation of your 55% of savings within Berkshire."

I'm thinking, for me, it might be a good low-cost, low-risk way to become more conscious of interest rates and compounding, as well as the mechanics of buying and selling things.

I kind of started in the deep-end during 2008, and benefitted from the terrific manic market. Last year, though, I got FOMO and started trading and made mistakes, not big ones, but, mainly, got out over my skis. I want to pull back and start from the beginning, again. I know it's a paltry amount, but I'm thinking it is the principle I need to practice. It's the only ball I can hit, right now. I also think being in slower company might be a good thing for me, if that makes sense.

Thanks.

"I also think being in slower company might be a good thing for me, if that makes sense."

Eliz,

Makes prefect sense. In fact, ignoring one's genetically imposed comfort zone with regard to risk gets a lot of people into more trouble than they ever recover from. Just because some people like to do crazy things with their money and lives doesn't mean you should, too.

As for jumping from Schwab to Vanguard, I'd say not to. The money market funds offered by both are sucky --that's a technical term. LOL-- compared to just buying short-term treasuries whose rates MM funds are lagging due to their expense ratios, no matter how low, and the fact they can't act as fast to new opportunities as can an individual investor.

At Schwab, treasuries can be bought two ways, at auction (commish-free) or in the secondary market at surprisingly low markups.

Charlie

Thanks, Manlobbi.

I mean I'm in the crawling stage, regards my knowledge of investing. And since investing is a subset of worldly wisdom, as Charlie Munger says, I have enough experience to know that my scant knowledge could get me in trouble if i get out over my skis.

Only in the last couple years have I bought Ibonds. And I just bought my first treasuries, last week. I bought one a couple months ago, but it was the minimum so see how it works. Now i have more significant funds in them, so I need to go through the entire cycle before I can say I understand them. I don't trust my intellect alone and need the actual experience of it to get the full sense of the things.

I imagine most people on these boards have more experience all ready, and I don't want to muck up their boards with my rudimentary questions. At the same time, I want to learn, so I want to post, so I'm inhibited, but that's my personality. This particular board is great since it describes me, the beginner part.

BTW, I appreciate your response. Someday I hope to understand the Manlobbi IV10, but i need to start at the beginning so I can be sure I have a strong foundation. I've launched into things without a strong foundation, and I find that that doesn't work well.
:) And I feel things in my body, so I need time and experience as well as intellect.

As for Vanguard, yes, with Vanguard the fees are about a half point less than Schwab for a similar cash product. I am curious about their setup so I want to put cash there to make some kind of improvement, instead of nothing, while still maintaining the safest possible stance as I continue to learn. One step at a time.

Thanks, again.

"Makes prefect sense. In fact, ignoring one's genetically imposed comfort zone with regard to risk gets a lot of people into more trouble than they ever recover from. Just because some people like to do crazy things with their money and lives doesn't mean you should, too. "


Charlie,

Well, I've done my share of ignoring my genetically imposed comfort zone and gotten into enough trouble in my life that I don't need to do that anymore!

As for the money market funds versus treasuries, themselves, I have some treasuries now, and my money-market is in treasuries, as well. With the money-market, I thought I could access the funds on an instant basis, while making a bit more than just carrying cash. I checked with Schwab, who said if I wanted to buy securities or whatever, I could make the purchase, which doesn't clear for three days (?) and my money market funds would be available as cash in one day. So I figure it was a small but simple improvement of interest, which I'll take. Unless, I'm looking at this wrong.

I picked up a dime on the street the other day. And a penny (it was clean), and I thought, good practice.

Mr. Market seems particularly wobbly right now, which is one concept I kind of get, and am using whatever discipline i have to maintain a ready stance.

Now, that secondary treasury market thing, I don't understand at all. The first question I have is why would anyone buy treasuries on a secondary market and tolerate a markup at all??? I haven't gotten that far in my studying, so I wonder how is that different than buying a treasury money market? Meaning: Are the mark ups in the secondary market cheaper than the fees for the money market? And, second, the purpose of the money market is so i can make interest instead of just having it in a low-interest bank sweep, which I can access pretty much like cash. If I want to sell a secondary treasury, quickly, do I run the risk of losing money? Or is that something for my next experiment with a small amount of cash?

BTW, I don't understand ETF's either, yet. So there's that, if the concepts are related?

Thank you, Charlie. The concepts of making even just a little of something that compounds is interesting to me! I sure hope I'm on the right track! Tell me if I'm not! Thanks.

And I just bought my first treasuries, last week. I bought one a couple months ago, but it was the minimum so see how it works. Now i have more significant funds in them, so I need to go through the entire cycle before I can say I understand them. I don't trust my intellect alone and need the actual experience of it to get the full sense of the things. - beginner

-----------------------

Despite investing in stocks, mutual finds, and ETF's for decades, I am new to Treasuries as well. I just recently bought my very first one and I posted about the experience over on the retirement board. You may find a morsel of information useful at this link

https://www.shrewdm.com/MB?pid=741657

Thanks, Mike!
Glad to know I'm in good company!

https://www.shrewdm.com/MB?pid=369870970

Mike,

Thanks for the information. Surprising that you didn't get the product you thought you were getting. I'll look at what I received to see that they were the same as I thought I was buying. Also, will reread your post to see if you bought through treasury direct or?

Above, I queried Charliebonds on treasury money market at Schwab vs. third party markets, of which I know nothing, at this point.

'Elizabeth

"If I want to sell a secondary treasury, quickly, do I run the risk of losing money? Or is that something for my next experiment with a small amount of cash?"

Eliz,

Any time you buy and then sell anything other than a MM fund, you run the risk of losing money (and even they are not risk-free). So there's nothing exceptional about Treasuries, short-term or not. If you exit a bond position you bought earlier, and interest-rates have moved higher in the meanwhile, you will lose money. Period. Additionally, you'll suffer the spread unless you're selling in size (i.e., typically, a round lot or more). Therefore, bill, notes, and bonds should be considered as "buy 'em and hold 'em" instruments, not as trading vehicles, with this exception. Because bonds can trade at a prem to par before expiration, sometimes it makes sense to capture that prem rather than wait for maturity. However, that's a game that's beyond your current expertise.

As buying in the secondary market as opposed to the primary market, markups aren't what matters. What matters is YTM/YTC/YTW. A shrewd FI investor buys where the achieved yields are highest, never having to pay some vig.

Charlie

"If I want to sell a secondary treasury, quickly, do I run the risk of losing money? Or is that something for my next experiment with a small amount of cash?"

Eliz,

Any time you buy and then sell anything other than a MM fund, you run the risk of losing money (and even they are not risk-free). So there's nothing exceptional about Treasuries, short-term or not. If you exit a bond position you bought earlier, and interest-rates have moved higher in the meanwhile, you will lose money. Period. Additionally, you'll suffer the spread unless you're selling in size (i.e., typically, a round lot or more). Therefore, bill, notes, and bonds should be considered as "buy 'em and hold 'em" instruments, not as trading vehicles, with this exception. Because bonds can trade at a prem to par before expiration, sometimes it makes sense to capture that prem rather than wait for maturity. However, that's a game that's beyond your current expertise.

As buying in the secondary market as opposed to the primary market, markups aren't what matters. What matters is YTM/YTC/YTW. A shrewd FI investor buys where the achieved yields are highest, never mind having to pay some vig.

Charlie

"As buying in the secondary market as opposed to the primary market, markups aren't what matters. What matters is YTM/YTC/YTW. A shrewd FI investor buys where the achieved yields are highest, never having to pay some vig."

I have no idea what you that means! --But i did start reading the Bond book, again. Not James. :)

"I have no idea what you/that means! --But I did start reading the Bond book, again."


Liz,

Wright's intro to bonds isn't a book that you read. It's a book that you study, pencil in hand, making notes, underlining key points, with a calculator at hand, checking every example she gives. Than, having gotten though the book once, you go back and go through it again.

For sure, such prep isn't necessary if you don't mind losing money or, at least, not making effective use of the obvious fixed-income opportunities there currently are. What's the alternative? Letting someone else make your investing decisions for you. But you already know how well that works. Don't try to your way through the book in one sitting. Study it one chapter at time, and don't skip a day of study.

Right now, due to the usual stupidity and arrogance of banksters, SVB is blowing up markets, and it's doubtful the Fed/Treasury cartel will offer an effective solution Monday morning, because they are the prime cause of the structural problems. But that won't mean that we ants should let ourselves be trampled by the elephants. That means we gotta understand how what they've done will impact us, and that means understanding how markets work, which means understanding the basic terms and concepts, which means study, study, study and then a lotta practice.

Charlie

"I have no idea what you/that means! --But I did start reading the Bond book, again."


Liz,

Wright's intro to bonds isn't a book that you read. It's a book that you study, pencil in hand, making notes, underlining key points, with a calculator at hand, checking every example she gives. Than, having gotten though the book once, you go back and go through it again.

For sure, such prep isn't necessary if you don't mind losing money or, at least, not making effective use of the obvious fixed-income opportunities there currently are. What's the alternative? Letting someone else make your investing decisions for you. But you already know how well that works. Don't try to work your way through the book in one sitting. Study it one chapter at time, and don't skip a day of study.

Right now, due to the usual stupidity and arrogance of banksters, SVB is blowing up markets, and it's doubtful the Fed/Treasury cartel will offer an effective solution Monday morning, because they are the prime cause of the structural problems. But that doesn't mean that we ants should let ourselves be trampled by the elephants. It does mean we gotta understand how what they've done will impact us, and that means understanding how markets work, which means understanding its basic terms and concepts, which means study, study, study and then a lotta practice.

Charlie

I agree and am aware. I did take out my pencil and calculator as well as used them. I am starting from scratch, however, so I need to learn how to calculate interest rates like BigHairyMike did on his treasuries to verify what I've gotten. I mean I don't know how to do those, so i might need a book to teach me that alongside the Bond book.

A lot of remedial stuff. That's ok.

At least I knew enough to buy short-term treasuries and not to have money over $250,000 or go over the bank's limit per customer. I have a ways to go though before I truly understand these things.


Thanks, Charlie.

Liz,

If you're looking for a website that explains basic financial concepts in ways that are neither insultingly simple, nor frustratingly complex, try Investopedia. Also, YouTube has hundreds of videos that cover financial/investing topics, many of which are really, really well done.

Charlie

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