WSJ's Zweig Says Cash Is Not Trash
The Wall Street Journal writes "Three Ways You Can Cash In on Cash." Columnist Jason Zweig tells us, "Cash isn't trash anymore. With stocks -- and just about every other asset -- taking a beating this year, even the most aggressive investors can suddenly see the virtue of keeping some money liquid and safe from market turmoil. And, at long last, your cash can earn income you don't need a microscope to detect. To do better, though, you'll have to put your money in motion. Bank accounts have earned next to nothing for nearly a decade and a half -- and still do. With the Federal Reserve jacking up interest rates, the national average yields on savings and money-market accounts at banks have doubled this year -- to 0.14%, a level that Greg McBride, chief financial analyst at Bankrate.com, calls 'nothing short of pathetic.'" The piece continues, "Fortunately, raising the return on your cash is easier than ever. For most investors, the two best choices are money-market mutual funds and U.S. Treasury securities. For years, money-market funds' yields have been stuck near zero, and individual investors yanked $43 billion out of such funds last year, according to the Investment Company Institute. In recent months, though, these funds have finally begun to pay more income. The Crane 100 index of the largest money-market funds yielded 2.64% this week, up from only 0.02% in February and 2.01% at the end of August. 'Money-market funds are worth a second look now,' says Harry Sit, who runs a blog called The Finance Buff. 'Rather than having to wait for [online banks] Ally or Synchrony or Marcus to adjust their rates on savings accounts or CDs, your money-fund yields can adjust daily with the market.'" Zweig adds, "Your brokerage firm may force you into its 'cash sweep,' an account with an affiliated bank that is likely to pay much lower yields -- a measly average of only 0.29% as of Sept. 23, according to Crane Data. Sweep accounts are designed as a receptacle for the dividend and interest payments your stocks or other investments throw off. All too often, they function like a jail, imprisoning your cash where it earns punitively low returns. However, you should be able to transfer your cash balance out of any sweep accounts into money-market funds offering much higher income. This week, more than 380 money-market funds were yielding 2.5% or higher, averaged over the past seven days, according to Crane Data. Many are from such leading firms as Fidelity Investments, Charles Schwab and Vanguard Group."
