Kiplinger's Personal Finance's John Waggoner writes on "6 Ways to Improve Your Yield on Cash," which gives a general overview of strategies and tips for retail liquidity investors. The article tells us, "Yields on most savings vehicles, such as bank deposit accounts and money market mutual funds, track the Federal Reserve's federal funds rate. For seven miserable years, from 2008 to 2015, the fed funds rate was tantamount to zero -- and that's about what you got from your savings. As the Fed has raised its benchmark rate, savings rates have risen with it." They quote CFP Jonathan Pond, "This is a huge revelation to my clients.... They are actually earning money on cash."

The piece says, "Although interest rates on savings are still low, they have caught up with inflation and beat the dividend yield of Standard & Poor's 500-stock index. And although cash may not yet be king when it comes to yields, it's important to remember that the income it generates comes with little or no risk -- providing a bit of respite from volatile stock and bond markets."

Kiplinger's explains, "Don't be discouraged if yields on your bank's savings account and money market deposit account are still at rock-bottom. The national average savings account yields a miserly 0.09%, and the average MMDA pays just 0.20%, according to But you can find higher yields by shopping around -- particularly at online banks and credit unions, which have lower overhead than traditional banks and can afford to pay a bit more."

On money market mutual funds, they write, "These mutual funds invest in short-term, high-quality securities, such as certificates of deposit and Treasury bills. Unlike other mutual funds, whose share prices vary daily, money funds keep their share price constant at $1 and pay interest by issuing new shares or fractions of shares. A money fund's yield equals its earnings minus expenses, and it closely tracks short-term interest rates. The funds' average 30-day yield is currently 1.82%, according to iMoneyNet. Most let you write checks on your account."

The primer explains, "Choose funds with low expenses, because anything you pay for fund management comes out of your yield. A favorite: Vanguard Prime Money Market Fund (symbol VMMXX), which charges just 0.16% a year in expenses and currently yields 2.21%. Savers in higher tax brackets should consider tax-free money funds, which invest in extremely short-term municipal IOUs. Because the interest is free from federal income taxes, the yields offered by tax-free money funds are lower than the yields of taxable money funds."

Kiplinger's also discusses CDs, saying, "If you want a bit more interest than you can earn from MMDAs, savings accounts and money funds, consider certificates of deposit. In return for a higher interest rate, you agree to keep your money on deposit for a set amount of time. Typically, the bank will charge three months' interest for early withdrawals from CDs with maturities of one year, and six months' interest for withdrawing from CDs with longer maturities.... Usually, the longer the maturity, the higher the rate. Be careful when choosing maturities."

Finally, they add on ultra-short bond funds, "These funds usually invest in securities that mature within one year. Typical ultrashort funds yield a bit more than money market funds. Unlike with money funds, the share prices of ultrashort funds can and do fluctuate. If you can't stand the thought of losing money, an ultrashort fund isn't for you. Nonetheless, we like Vanguard Ultra-Short-Term Bond (VUBFX)."

In other news, PIMCO posted new blog entry entitled, "Packing for the Holidays: Reducing Risk with Short-Term Bonds." Authors Jerome Schneider, Tina Adatia, and Kenneth Chambers, write "[I]nvestors concerned about rising rates or sudden equity market drops may want to consider lowering risk in their portfolios as part of their preparation for the holiday season. In an aging economic expansion, when changing liquidity conditions and costs can lead to more market volatility, a short-term bond strategy can provide balance for investors: a defensive approach that reduces interest rate risk while tapping into diversified sources of yield at the front end of the bond market."

They comment, "Rising interest rates are a fixture of late-cycle markets. Over the next 12 months, interest rates are likely to grind higher, particularly in the U.S., where economic growth remains above trend. PIMCO forecasts three additional policy rate hikes from the Federal Reserve by the end of 2019.... Short-term bond strategies have low duration, typically one year or less, and therefore can help reduce a portfolio's sensitivity to interest rate changes as the Fed gradually raises rates.... [S]hort-term portfolios can be positioned to benefit from rising rates and higher yields as benchmark rates continue to increase."

This piece too warns about CDs, saying, "CDs are time deposits, requiring specified investment periods, or 'lock-ins,' of anywhere from a month to several years, and withdrawing early usually results in penalties or forfeiting interest earned. We think this can create drawbacks for investors. Depending on the strategy, investors in short-term bonds may have more ready access to their assets."

It adds, "In today’s market, this can mean the flexibility to reinvest as interest rates rise and when prices for other assets, including equities, become attractive -- the very reason that many investors today may be holding high cash and short-term allocations. Furthermore, national average CD rates as of mid-November ranged from 0.56% for one year to 1.20% for five years, according to the FDIC, which are still lower than the fed funds rate and prevailing short-term benchmarks. Actively managed short-term bond strategies can invest in a broader universe of securities and thus aim for higher returns than traditional cash vehicles."

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