BlackRock: "Put Your Cash to Work"
BlackRock published a blog entry entitled, "Put Your Cash to Work." Fixed Income Product Strategist Karen Schenone writes, "Americans like cash. A lot. There is $2.7 trillion in money market funds alone, plus another $9.1 trillion in bank deposits, like checking accounts and certificate of deposits (CDs).... Americans have about 58% of their investable assets in cash or cash equivalents, based on our investor survey. They do so for a variety of reasons, and some of them make sense, like monthly expenses, emergencies and upcoming events. But when 11% of those surveyed say they 'just like to have it there,' the comfort associated with cash seems out of place. The survey shows also that about 20% of the cash is earmarked for investing purposes - either as 'dry powder' to invest later or as long-term savings. However, if you have a time horizon of greater than six months, chances are that cash money may work against you." The piece explains, "Here are two steps to start putting your cash to work. Step 1: Segment your cash needs. How much do you need for monthly expenses, emergencies or upcoming events? Keep that amount in cash equivalents, like a money market fund or FDIC insured bank deposit. Consider putting the remainder in the market. Step 2: Invest in a way that reflects who you are.... If you want to get your cash off the sidelines but aren't ready to commit to something long term, consider a short-term bond exchange-traded fund (ETF)." BlackRock's piece adds, "Short-term bonds tend to be less vulnerable to rising rates than longer-term bonds while typically providing a higher yield than cash. There's a variety of funds to choose from: iShares Floating Rate Note ETF (FLOT) and iShares Short Maturity Bond ETF (NEAR) hold investment grade floating and fixed rate bonds, respectively. For taxable accounts, investors can consider iShares Short Maturity Municipal Bond ETF (MEAR), whose income is generally exempt from federal income tax. These funds can be used to potentially add more income ... while helping you step out of cash and meet short- or long-term investment goals."
