TheStreet on Close-to-Cash ETFs
TheStreet highlights "near-cash" ETFs in its recent article, "5 ETFs That Are Great For An Emergency Fund." They write, "The COVID pandemic put the importance of having emergency savings squarely in the spotlight.... It's something that many people, unfortunately, were forced to deal with quickly and unexpectedly.... But I'm an ETF guy, so I'll be giving you a handful of options if you want to build your emergency fund through these products.... There are a lot of great low-risk, low-cost choices among ETFs. Here are a few of my favorites." The piece cites, "SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL): As far as ETFs go, this is about as conservative as you'll find. The 3 month and less maturity requirement means there's almost no interest rate risk involved. The fact that it's invested in Treasuries means there's almost no credit risk involved. As far as safety goes, you may not find a less volatile ETF around.... Given its overall profile, this is very similar to a traditional money market fund. Goldman Sachs Access Treasury 0-1 Year ETF (GBIL): The next step up would be investing in a T-bill ETF that allows maturities up to a full year. GBIL does that, but still has the majority of assets in Treasuries with maturities of 6 months and less. It has the same ultra low risk profile as BIL, but adds just a touch of higher risk and yield potential." TheStreet also mentions, "WisdomTree Floating Rate Treasury ETF (USFR): Floating rate Treasuries have a bit of a different structure than BIL and GBIL, but have a yield/risk profile that's substantially the same. USFR holds Treasuries with longer maturities (up to about 2 years out looking at the current portfolio), but because the interest rates reset on a regular basis, they end up behaving more like Treasury bills. USFR has just over $1 billion in assets, making it smaller than GBIL and significantly smaller than BIL. That could mean minimally higher trading costs, but USFR is still liquid and cheap. JPMorgan Ultra Short Income ETF (JPST): This is the first ETF on the list that focuses on ultra short-term investment grade corporate bonds instead of Treasuries. That means you're introducing credit risk into the equation, which tends to up the volatility a bit. Most of the portfolio is in the AA- to BBB-rated range, still safe enough to pose little default risk, but enough to make the portfolio modestly riskier. The current yield of around 0.3% means you get a little bit of income for your trouble, but JPST is simply an option for those wishing to increase their risk/return profile a bit without taking too much risk. It's worth noting that even ultra short-term corporate bond funds ran into trouble during the COVID bear market last year. JPST dropped more than 3% over the course of a few weeks back in March when investors abandoned anything with risk and share prices started disconnecting noticeably from their underlying NAVs, something that is very unusual with ETFs. In the vast majority of cases, risk here is low, but last year shows that things can still go sideways in the wrong conditions." Finally, the article highlights, "PIMCO Enhanced Short Maturity Active ETF (MINT): MINT actually combines Treasuries and investment-grade corporates into one portfolio (although it leans heavily towards corporate bonds currently). It's also actively managed, so it tries to pick and choose only the best opportunities within the fixed income landscape. From a risk perspective, it has the same story as JPST a year ago. Its share price dropped about 4% in short order, but was able to recover its losses by June once the market stabilized. Among short-term safer bond ETFs, MINT has been one of my favorites."
