For this week’s Barron’s Advisor Big Q, we asked financial advisors: Where are you telling your yield-hungry clients to stash their cash?
Bob Peterson, senior wealth advisor, Crescent Grove Advisors: The starting point is the FDIC-insured high-yield online savings accounts, where you’re still getting, on average, about 4.1%. It’s safe, very liquid, and most clients already have these established. The other one we have been using a lot more over the past few years is the money markets that are held at firms like Fidelity, Schwab, and Vanguard. The basic money market is 4.5% at Fidelity, so you’re picking up 40 basis points over online savings. As yields continue to adjust, that spread is going to narrow. But it’s the easiest and safest option we’re seeing for ultrashort-term money right now.
But if you start to extend out your horizon just a little bit, if you think the Fed’s going to continue to cut over the next few months and you want to be safe, you can get a one-year Treasury for 4.1% or so. That’s the same as you’re getting today in an online savings account, but you’d be locking in your yield for 12 months. Finally, if clients have more than enough liquidity, we’re using a combination of A-rated, ultrashort bond funds where we can have a duration of around 1 or 1.2. You’re picking up over 5% on average when you look at the blended yield distribution.
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