Where to keep cash on the sidelines?

Question

Where does everyone store the cash they keep on the sidelines while you're waiting to put it to work? This would be money that I wouldn't want to risk losing. What would be the highest return available that provided the least amount of risk with the most liquidity? Aside from leaving it in a money market are there places you can put it that will at least make something, even if it's a small return? I usually stick it in bonds, but the bond market looks a little more risky right now.

Thanks

Ivan Barratt · Answer

No clue. I keep my war chest in cash vs paper.  🤑

Brian Garrett · Answer

American Express High Yield Savings Account paying around 2%.

Mark Welp · Answer

@Ray S.

High cash value life insurance!

Thanks!

James Mc Ree · Answer

I use the following right now:

REIT: Vanguard Real Estate Index Fund (VGSLX)

Bond fund: Vanguard Pennsylvania Long Term Tax Exempt Fund (VPAIS)

Fund prices will fluctuate with the market.  This fund is up 19.9% over the past year.  No one complains about that, but it could be down as well.  You can't use them if you can't tolerate that.  Vanguard has a "Market Neutral" fund that minimizes volatility, but it is expensive and I don't really understand why I would want to buy it.  I like the REIT index as it spans multiple REIT companies.  You can be more targeted by buying one of the companies if you want to target residential REITs, for example.  That may be more volatile though.

I live in PA, hence I chose a PA tax exempt fund.  I don't think Vanguard has an FL version, but I am sure FL tax exempt funds exist.  I chose long term with interest rates that seem to be trending down over the short term (maybe).  I will switch that to short term or a money market if interest rates look like they will turn upward.

Ray S. · Answer

Straight up bonds, or bond funds? Thanks

Ray S. · Answer

Thanks. 2% (1.9% currently) isn't bad at all for a savings account. There's no minimum hold period? And you can transfer your money out within days?

Ray S. · Answer

I bought some REITs a while back. They had good dividends but the prices were volatile, so they weren't very liquid because I didn't want to take the money out when the fund was down. Are there any you recommend that are very stable and offer decent returns? Which bond fund do you buy too? Thanks

Ivan Barratt · Answer

Treasury bonds. As interest rates fall the bond will also appreciate.

James Mc Ree · Answer

I use a REIT fund investment to put the money to work in real estate until I use it to buy my real estate.  I've also used a diversified stock fund depending on my feelings on the stock market at the time.  My operational cash is in a money market and self-managed escrow is in a diversified bond fund.

The main downside I see with using funds other than a money market is transactions generate short term capital gain taxes (hopefully) or losses if the price drops.  Use a money market fund if you can't tolerate that.

Where to keep cash on the sidelines?

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