Fixed Income Products

Financial Planning - Financial planning in general. (Moderated) 

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Subject Author Date Fixed Income Products kramer31 06-27-2008  Re: Fixed Income Products PeterL 06-27-2008  Re: Fixed Income Products Will Trice 06-27-2008  Re: Fixed Income Products Douglas Johnson 06-27-2008  Re: Fixed Income Products TB 07-02-2008  Re: Fixed Income Products kastnna 07-02-2008  Re: Fixed Income Products beliavsky 07-02-2008  Re: Fixed Income Products Tad Borek 07-02-2008  Re: Fixed Income Products Paul Michael Br... 07-04-2008
Posted by kastnna on July 2, 2008, 1:01 pm > kramer31 wrote: > > Hi.  I recently opened an IRA with Scottrade. They give 0.2% on > > cash holdings (which is basically nothing).  I want something with a > > reasonable rate of return without a time limit that I can put my money > > in while I am waiting to invest it. > > The scenario you're describing is the reason I suggest that people look > closely at money-market rates when choosing a discount broker. Saving a > couple bucks per trade may be nothing compared to the "lost income" from > a chronically lousy MM rate. Amen to that! When account balances get into the 100k+ range, trading charges constitute fractions of a percent of the account balance. Yet, because the fees are up front and clearly shown on statements, people often throw a tantrum. Unless you're doing a lot of trading, there are simply too many other concerns that carry far greater weight (like money market rates). -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by on July 2, 2008, 1:35 pm > > > kramer31 wrote: > > > Hi.  I recently opened an IRA with Scottrade. They give 0.2% on > > > cash holdings (which is basically nothing).  I want something with a > > > reasonable rate of return without a time limit that I can put my money > > > in while I am waiting to invest it. > > > The scenario you're describing is the reason I suggest that people look > > closely at money-market rates when choosing a discount broker. Saving a > > couple bucks per trade may be nothing compared to the "lost income" from > > a chronically lousy MM rate. > > Amen to that! When account balances get into the 100k+ range, trading > charges constitute fractions of a percent of the account balance. Yet, > because the fees are up front and clearly shown on statements, people > often throw a tantrum. Unless you're doing a lot of trading, there are > simply too many other concerns that carry far greater weight (like > money market rates). Discount brokerage firms catering to active traders often pay low interest on cash balances. At least for a taxable account, it's useful to have more than one broker and to sweep cash using ACH to the brokerage that has better interest rates. -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by Tad Borek on July 2, 2008, 2:40 pm beliavsky@aol.com wrote: > Discount brokerage firms catering to active traders often pay low > interest on cash balances. There's a "follow the money" answer too...when you see brokerage firms report their income recently, their ability to borrow on the cheap and lend at higher rates, has been keeping the numbers up. Example, Schwab's Q1-2008 income statement, where they break income down by segment... http://tinyurl.com/3tvast Interest revenue, $510 million, interest expense $91 million - good business to be in! Total profit for the quarter was just $305 million. Trading revenue (not income, just revenue) was only $246 million. Point being, trading commissions are a bit like the loss-leader at a supermarket, the $1.99/gallon milk that gets you in the door. It's not how most brokerage firms really make their money, and the ways they do make money have to come out of account holders' pockets - such as low MM rates on core cash balances. As B pointed out a low MM rate might be tied to low commissions, for active traders who don't care because they don't keep much in cash...but if you do, you might look for a firm with higher commission but better MM rates. -Tad -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by Paul Michael Brown on July 4, 2008, 11:26 am > For some MM funds, there's a minimum trade in & out of the fund. And > each trade in and out might trigger a ticket charge. As an example, > Vanguard's money-market funds are likely to be "non-NTF" meaning you pay > a trade fee every time you buy or sell them. Not so. I have a Vanguard money market fund in my taxable account. When I want to buy any other fund, it is a simple matter to "exchange" shares in money market fund for shares in any other Vanguard fund. There is no fee to make the exchange and the trade is accomplished quickly. Sounds like the original poster wants to be able to park some cash somewhere earning a decent return, yet still have it available to make quick purchases for his tax advantaged account. As others have noted, the discount brokers don't make this easy. But Vanguard's money market funds all offer competitive yields and the ability to exchange into other Vanguard funds with no transaction fee. -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. 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