What are some good, safe options (e.g., ETFs) to place investment funds between investments?
What are some good, safe options (e.g., ETFs) to place investment funds between investments? I want to earn more than the bank interest rate when I am holding funds in cash.
As long as you understand how much money you could lose in an ETF under the right (or would that be wrong) economic situation, an ETF is an option. But if you absolutely, at a minimum want all of your money back when you are ready to buy other investments, then your only real alternative is a money market fund. That's is what they are there for. A safe place to store money for future use. There is no such thing as high return and safe. It there were, why do you think there are trillions in bank accounts and in money market accounts?
An FDIC insured, online, high yield, savings saving account, e.g., PurePoint Financial.
A US Treasury money market fund e.g., Vanguard Treasury Money Market.
A US Treasury Bill bought in a Schwab Brokerage Account with No Transaction Fees.
An FDIC insured cash balance held at Interactive Brokers.
Depending on your financial goals, it might make sense to allocate your savings to a high yield savings account, which is a 100% liquid cash account that, in many cases, pays over 2% in today’s environment. This is a cash vehicle with much better yields than a typical money market account and without the liquidity issues of CDs in case you need to withdraw from it for any short-term savings goals. This is the most appropriate place to park funds if you will be spending them within the next 18 months.
If you don’t expect to need the money in the next 18 months, it may make sense for you to look at investing in a low-cost mutual fund or ETF, but again, I recommend consulting with a Registered Investment Advisor (RIA) to discuss the best path to reach your financial goals based on the time horizon you have in mind. The reason I say this is that funds needed in 5 years would be invested differently, and typically more conservatively, than funds not needed for 20 years.
We all sell investments for a variety of reasons. Sometimes, it is good to keep cash or money market funds. If the idea is to replace an investment sold due to market hitting highs or market valuations getting a little expensive, then look to broad based BOND ETF's. There are many bond funds that allow you to choose between duration, risk and yield. Search an ETF screener for Bond ETF's based on duration or maturity. You will find the lower the duration, the lower the volatility of the fund. These types of Bond ETFs still carry risk but definitely can provide better yields than bank interest.