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Where to store cash for a while?

Account Net-Liq: $7,437.20
SPX value: 3,479.73
Shiller PE: 32.01
 

I was looking for opportunities where I can store my cash in my trading account in lieu of leaving it in the account, sitting there and doing nothing.

I also didn’t want to withdraw them and save it in a savings account. That would work against my Net-Liq.

I also wanted the money to be blocked, so I couldn’t use them in other trades. I am now saving cash for another trade I want to take (buy LEAPS against SPY and start selling covered calls) and I must admit my discipline is not yet perfect and I might be tempted to use that money on another trade. So locking the cash in equity which would not lose value and even make some would be perfect.

But, where could you put your money, short term, preserve their value, and maybe make some? Make better than 0.0009 APY the broker may pay you for cash?

This is a question to savers all around the world too. If you look at the current savings accounts rates, you would want to cry!

 
High Yield Savings Accounts Yields
 

The rates are pitiful and they may drop even lower. Poor savers! Retired people who depended on CDs or savings accounts are ruined.

I finally found a good opportunity! Thanks to another investor in a Facebook group, who pointed me to an opportunity which may do exactly what I am looking for – safety, stability, and some decent income.
 

iShares Ultra Short-Term Bond ETF (ICSH)
 

ICSH is a short term bond ETF that seems to fulfill my needs. It holds its value (slightly going up), it pays dividends (nothing extra), the yield is about 2.20% at the current price of $50.56 a share, but definitely better than today’s high yield savings accounts) and during March selloff it only lost about 4.45% while the entire market lost almost 40%. Not bad in my opinion. And, it pays a monthly dividend.

 
iShares Ultra Short-Term Bond ETF (ICSH)

iShares Ultra Short-Term Bond ETF (ICSH)
 

I believe, this is a good way to hold cash, or if you are afraid of the stock market, or a retiree and looking for a savings account which pays better yield (a lot better) than current high yield savings accounts, then, in my opinion, ICSH is a good option to do.

Thus, my goal is to save $4,000 in my brokerage account and then buy SPY LEAPS calls and start selling covered calls. I will be saving my cash using ICSH.

 
My 2020 investment goal
 
 

If you are interested to see what stocks and what options we trade, then join us at MeWe. We no longer participate at Facebook (very little though) but we are active at MeWe.





5 responses to “Where to store cash for a while?”

  1. Stalflare says:

    Ciao Mart,

    I was looking at a similar solution, ticker is MINT. What I struggle to understand is what are the potential dangers of these instruments, as far as I understood they invest in nearly expired bonds, so technically price should be close to parity, avoiding potential and sudden drops, but maybe I am missing some points?

    ciao ciao

    Stal

    • Martin says:

      The only thing which may be concerning is that these funds (MINT and ICSH) invest in corporate bonds, so they are not truly a cash equivalent unlike funds investing in treasuries (BIL, SCHO, GBIL, or VGSH).

    • Martin says:

      I was looking at the same thing and I didn\’t see anything to be concerning. Also if you look at the long term chart the price is relatively stable in both tickers and the recent drop was less than 5% while the stocks lost 35% so I guess, it is good cash protection in my opinion. And it pays nice dividends making this a lot better savings vehicle than a savings account. Could it go wrong? I guess, it may but I do not see anything wrong as of now. If you find something, let me know! Thanks!

      • Stalflare says:

        Yes it’s totally correct, these are all funds that invest in corporate bonds, I guess the dividend yield comes from there. The options that you’ve listed are valid but it seems that none of them are offering dividends, am I correct?

        The risk of course is in the underlying, being exposed to corporate bonds, the moment the fiscal stimulus is withdrawn you are in for some rough patches, although the supershor nature of the bonds help, because 3 months to expiration means that they are almost on parity. (unless the company bankrupts in that case you’ve got a straight loss).

        • Martin says:

          They do pay dividends, the yield is smaller though, around 1.3%, still better than today\’s savings accounts.
          I don\’t think FED is going to end the stimulus any soon. If they do, this house of cards will collapse. They may try to unwind slowly but do not pull it out…

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