Broker Check

Got Cash?

October 2012

All of us know that we’re earning virtually nothing on our cash held in banks. This isn’t expected to change soon since the Federal Reserve stated that they anticipate keeping interest rates low potentially into 2015. What can you do to earn more? Here are three possibilities that I’ve been discussing with clients:

  • A high-yield online money market account. We have access to an online bank program that offers various banking products. One is a money market account that is currently paying a 1.25% yield for the first six-months and then 0.80% thereafter. Much higher than the 0.10% most banks are paying. It is FDIC insured.
  • Frontier Asset Management, an institutional investment manager, offers a Short-Term Reserve portfolio designed as a cash alternative. It is actively managed by Frontier with the objective of protecting the principle while at the same time providing a higher return than money markets and CDs. While the portfolio primarily invests in tax-exempt fixed income and absolute return funds, it may also use equity funds to potentially act as a hedge to market declines in the fixed income portion. The portfolio is expected to take on the same risk as the Barclays Capital 3-Year Municipal Bond Index. The portfolio is not FDIC insured and there is no guarantee of principal.
  • A Renewable Secured Debenture which offers various terms and rates and is backed by the company’s assets; in this case, life insurance policies they purchase from people who no longer want or need their life insurance policy. Available terms range from six-months to seven-years. Current rates begin at 4.75% for a six-month term. These are not FDIC insured and there is no guarantee of principal. There is a $25,000 minimum investment and there are suitability requirements – clients must have a minimum of:
    1. $70,000 in gross household income and $70,000 of net worth (excluding equity in a client’s primary residence) OR
    2. $250,000 of net worth (excluding equity in a client’s primary residence)

If you are ready to get your cash working better for you, please email or call me to discuss the various differences between these options and how each be appropriate for your situation. Similarly, please forward this email to anybody that might also be looking to earn more on their cash or might benefit by speaking with me about their financial questions or goals.