Idle Cash – Alternatives to Low Yields

The Federal Reserve has driven short-term interest rates up this year, with three month U.S. Treasury bills yielding 1.85% this week. But you’d never know any of that from looking at the returns on the cash in your brokerage account. The brokers have been slow to raise rates on their deposit sweep accounts, so idle cash held in your account isn’t earning much in the way of return.

There are alternatives that provide much higher returns for little to no risk. The aforementioned U.S. Treasury bill yields 1.65% for a month long maturity to 2.25% for a year long. U.S. Treasury bills are risk free and can be bought without markups or commissions in most brokerage accounts.

For those who don’t want to manage individual bond maturities, there are also many short-term mutual funds and ETFs that hold AAA rated short-term bonds that are yielding in excess of 1.5% and provide daily liquidity. ETF is a great resource for finding bond ETFs with short or ultra-short (less than 3 months) term maturities, many of which are commission free to buy on the major discount brokerage firm platforms.

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