In this new episode of Three Minute Macro I discuss some of the best options for investing cash right now. A lot of banks are still yieldiong 0% on deposits and the best high yield savings accounts are still only offering 3% or so, but if you are willing to do a little legwork you can get over 4% with no principal risk.
I discuss some of the basics of how money market funds and savings accounts work and then offer a few options for how to maximize the return on your cash.
In my opinion this is one of the most important factors in achieving financial success. As you might know from my recent paper on “All Duration Investing” the cash and short-term buckets are the key components of your asset allocation. They are the buckets that give you certainty in a sea of economic uncertainty over time. In the All Duration framework I like to think of your asset allocation across a bell curve. The core of the curve should be medium duration instruments (medium duration bonds, stocks, multi-asset funds, etc). The tails are where you get your insurance and certainty. In this case, cash is your nominal certainty allocation and something like inflation hedges can operate as long duration real return hedges. Optimizing the cash component is essential to having certainty around the aggregate portfolio so you construct a portfolio that’s more behaviorally robust in uncertain periods like the present.
I hope you enjoy the video. And if you’d like to learn more about how to bypass the banks and their low rates so you can get your full 4%+ or more on cash then please reach out to me.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.