Where To Park Cash And Get Yield

Seeking AlphaDividend IdeasWhere To Park Cash And Get YieldNov. 15, 2020 9:35 AM ET|| Includes: DHS, DTD, DVY, GSY, IVV, MINT, SDY, SLQD, SPSBby: Rida MorwaRida Morwa High Dividend OpportunitiesThe #1 Service for Income Investors and Retirees, 9-10% dividend yield.SummaryA cash balance has many uses in a portfolio.
Cash is exposed to inflation risk far more than any other asset class.
Short-term investment-grade bond funds provide a good cash equivalent with low exposure to credit and inflation risks.
We will have a look in this report at the best options to park your cash to protect yourself against inflation and get a little yield too.
Co-produced with PendragonY
Introduction
Just under a year ago, we wrote an article about how to address the competing priorities of having a significant amount of cash on hand while not taking a big hit to income and inflation. On the one hand, it's nice to have cash ready to pay both expected and unexpected expenses, and even to take advantage of a price drop opportunity in a company you want to own. It's also good to have the cash already available so one doesn't have to sell shares at a time when the prices are low. So we looked at several funds that, while not exactly cash, could have similar benefits as cash while not being reduced by inflation.
One will want to keep some actual cash on hand, but as a cash equivalent, we want funds holding short-term bonds or bonds with only a short time remaining until they mature. The short amount of time remaining to maturity will help reduce interest rate risks. This is because the fund will buy new bonds, which have a higher rate, by redeeming older, lower-rate bonds at par, rather than selling them on the market at a price below par.
As a test, we invested $180,000 into each of four ETF funds approximately five years ago and then made 20 quarterly withdrawals that were inflation-adjusted starting at $9,000. A fund passed the test if money remained in the fund account... Read more