what is the best vehicle for short-term cash

Discussion in 'Trading' started by highstake, Dec 15, 2006.

  1. I have question on where to put short-term cash between trades.

    Is ETF a good solution, or just take the miserable interest rate the brokerage offers ?

  2. Money market rates at many brokerages are roughly 3.5% to 4%, and at banks, they're 5%+, with the right minimum balances.
  3. Most of the average online brokers have reasonable money market rates, but in some cases, you have to hunt them down. My AMTD swing account is getting around 4.3% payable daily, not great, but better than their default 1.5% rate. They did not advertise this on their site, you have to ask them.
  4. thanks man !

    My account on TDAmeritrade only offers about 1% (or less). I'll definately ask them about it.
  5. hels02


    I have several accounts, and there's a definite tradeoff for high interest vs features.

    If you plan to sideline cash a lot, Bank of America's trading account is currently paying 4.53 in the sweeps, and it's only $5 a trade (BOTH market and limit). They're a typical bank when it comes to daytrading (not to mention that they don't instantly update, and while you can sort of daytrade... something new for them... your cash is immediately available now, it still looks all messed up for 5 days in your account balance due to the settlement date thing- I do it all the time anyway).

    You can get 30 FREE trades, no commissions, a month if you have only $25K in their bank (can do CD's, not just banking). It's a great deal, and the bank account lets you see your investment accounts all at once. Also, I trust their accounting a hella lot more than any small brokers, who don't track your cash nearly as obviously. Etrade did and still does strange things in their accounting (like I got a dividend payment once for $290 for only 300 shares of a $10 stock, which vanished the next day from my account, and then foreign taxes were taken out on that $290, then returned, but it only turned out to be $17 in dividends, and then the $17 was removed.... and they couldn't explain it by phone ... things like that).

    If you like options and daytrade, interest is really low or nonexistent on the cheaper comission brokers. But if you want to do options, Think or Swim is fantastic for their free options software, free education, execution time, etc., even tho they're more expensive than IB for commissions.

    If you do less than 30 trades a month and if you sideline a lot of cash, the interest definitely matters, so you may want to look into Bank of America for commission free trades, not too bad research (you get all the S&P/Argus/Sabient reports free), and the best accounting. If you want to do options, forget Bank of America, ThinkorSwim is awsome. Then you have to store your $$ in an ETF or a bond fund.
  6. thanks a lot for your detailed explaination, hels02.

    Just checked BoA website,

    They are starting to offer 30 commission-free online equity trades per month.

    Get as many as 30 commission-free online equity trades per month1 with:

    * A self-directed brokerage account with Banc of America Investment Services, Inc.
    * A combined balance of $25,000 or more across your Bank of America, N.A. deposit accounts (including checking, savings, and CDs)
  7. hels02


    Oh, it's a fantastic deal. And if you do that $25K with a checking account (if you don't have $25K, why are you posting on a trading forum?),

    EVERYTHING is free, including all your billpaying and online banking. So free trading, free banking, the best online account management, total security, and personal banking. Free notaries, free money orders/travelers checks, free checks, free everything. All free. You even get free real time streaming quotes (but I don't use it because it's very limited).

    You just dont' want to day trade or do options in your BAC self-directed account because they're slow and expensive for the options. But over time, you will save a hella lot of $$ on all the bennies.:D
  8. Are you insane? Putting money in an ETF between trades because you believe it will make you more cash then a money market accoint???

    Wake up and smell reality. These ETFs trade just like stocks. They have ups and downs. Sometimes when they go down, they dont go back up for a while. ETFs are not meant to be used in the manner you described.

    If you want to put your cash into an ETF then look at the chart, do a little research. ETFs, just like stocks, do not always go up and they are not a "safe haven" for your cash, ever.

    The only two safe havens are US Treasury bonds (and I might start to doubt that one day) and money market accounts.
  9. hels02


    Eagle, it depends on the fund/etf. It's very liquid, and if you pick one that's into bonds, it's pretty safe.

    If you have to pick 2, I'd go with BGT or PCN. While they can go down, they pay HUGE yields and... well... check the charts, the ranges are very small (but DO fluctuate). If you needed your money for a great deal RIGHT NOW, how are you going to get $$ out of treasuries instantly? On BGT I'm up 12% in a few months, and they weren't big months for bonds:p.
  10. galiano


    RE: ETFs

    1) you pay commission in and out
    2) to capture the dividend you must be owner of record on ExDiv date which is monthly for fixed income.

    FWIW, I agree with both points of view. Depending on purpose, hold time, and amount, ETFs may be a valid alternative to increase yield. For my needs, vanilla money market with constant value works. Without need of concern for the fixed income market et al.
    #10     Dec 15, 2006