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Post by steadyeddy on Jan 28, 2023 23:04:34 GMT
Is it worth buying to park cash in an IRA?
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Post by yogibearbull on Jan 28, 2023 23:23:38 GMT
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Post by Fearchar on Jan 29, 2023 0:23:17 GMT
It depends on your purpose and plans.
If you wish to maximize yield, then clearly the 6month beats the 3 mo.
However, you could be able to roll over the 3mo in 3 months.
Most brokers don't do this automatically, so you'd have to do that and lose (and week of interest).
The 3mo, 3 months from now will probably be higher than it is now, but
I'm not so sure it will be higher than the 6mo is right now.
In my own situation, I suspect that I'll be investing within 3 months from now anyways.
So, I don't wish to the longer maturity.
If my T-Bills mature and I'm not ready to invest (within a week or so), then I'd probably just put the
cash in a good MM. Some brokers put your cash into good MM's automatically, but not all of them!
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Post by yogibearbull on Jan 29, 2023 0:50:44 GMT
Even with manual roll of Treasuries into like Treasuries, no interest is lost. But some planning and coordination are required.
For example, next week there is a maturing 3-mo on Thursday, 2/2/23 (I had bought those 3 months ago). My order to buy 3-mo at Auction will be executed on Monday, 1/30/23, but it will have settlement date of Thursday, 2/2/23. So, my credit from Treasury on Thursday, 2/2/23 will more than cover my purchase; in particular, I don't need to have money available in Fido core or Fido m-mkt for my purchase on Monday.
If I had used Fido auto-roll, this would happen all by itself.
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bruno
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Post by bruno on Jan 29, 2023 2:37:40 GMT
Is it worth buying to park cash in an IRA? If you buy in IRA its my understanding you lose the deduction for state tax. If true not sure the Fido money market @ 4.26% would not be a better place so you could have your money NOW. |
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Post by steadyeddy on Jan 29, 2023 3:42:31 GMT
Is it worth buying to park cash in an IRA? If you buy in IRA its my understanding you lose the deduction for state tax. If true not sure the Fido money market @ 4.26% would not be a better place so you could have your money NOW. , true... that is the nature of IRAs... thanks for pointing this out. |
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Post by steadyeddy on Jan 29, 2023 3:43:19 GMT
Even with manual roll of Treasuries into like Treasuries, no interest is lost. But some planning and coordination are required. For example, next week there is a maturing 3-mo on Thursday, 2/2/23 (I had bought those 3 months ago). My order to buy 3-mo at Auction will be executed on Monday, 1/30/23, but it will have settlement date of Thursday, 2/2/23. So, my credit from Treasury on Thursday, 2/2/23 will more than cover my purchase; in particular, I don't need to have money available in Fido core or Fido m-mkt for my purchase on Monday. If I had used Fido auto-roll, this would happen all by itself. , if you choose auto-roll how do you break the cycle without selling prematurely? |
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Post by steadyeddy on Jan 29, 2023 3:44:05 GMT
Is it worth buying to park cash in an IRA? If you buy in IRA its my understanding you lose the deduction for state tax. If true not sure the Fido money market @ 4.26% would not be a better place so you could have your money NOW. , which Fido MM shows a 7-day yield of 4.26% ? I do not see SPAXX or FDRXX paying that. |
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Post by yogibearbull on Jan 29, 2023 3:59:13 GMT
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Post by steadyeddy on Jan 29, 2023 4:22:54 GMT
Thanks yogibearbull. Appreciate the clarity in your responses. |
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bruno
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Post by bruno on Jan 29, 2023 5:01:41 GMT
If you buy in IRA its my understanding you lose the deduction for state tax. If true not sure the Fido money market @ 4.26% would not be a better place so you could have your money NOW. , which Fido MM shows a 7-day yield of 4.26% ? I do not see SPAXX or FDRXX paying that. FZDXX, Sorry on my Fido positions page it now shows up to 4.28%. |
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Post by Fearchar on Jan 29, 2023 7:53:29 GMT
Even with manual roll of Treasuries into like Treasuries, no interest is lost. But some planning and coordination are required. For example, next week there is a maturing 3-mo on Thursday, 2/2/23 (I had bought those 3 months ago). My order to buy 3-mo at Auction will be executed on Monday, 1/30/23, but it will have settlement date of Thursday, 2/2/23. So, my credit from Treasury on Thursday, 2/2/23 will more than cover my purchase; in particular, I don't need to have money available in Fido core or Fido m-mkt for my purchase on Monday. If I had used Fido auto-roll, this would happen all by itself. Thanks Yogi, my mistake. I have 3 month that I bought on the secondary. It is coming due on Tues Jan 31. So, get gapped, and I did not realize this is unique to secondary purchases. Another reason to not use secondary. |
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Post by yogibearbull on Jan 29, 2023 13:07:48 GMT
Fearchar , idea will work for secondaries too but becomes even more tricky. Reason is that in the secondary purchase, you may have bought some other Treasury with 3 months remaining at the time, not a genuine 3-mo T-Bill (at original issue). But continuing this discussion (that may be not be of interest to most posters), let us see what Auction coordination was/is possible with Treasury maturing on 1/31/23. First, look at Treasury Auction Schedule (link below) to see what settles on 1/31/23, or 1-2 days later (say, that is the max gap you want). Then 2 possibilities: 1. What you COULD HAVE done (because the relevant Auction dates 1/24/23 - 1/26/23 are past): You could have bought 4-wk, 8-wk, 17-wk T-Bills; 2-yr, 5-yr, 7-yr T-Notes in the past few days. All these could just settle from the proceeds of your 3-mo maturing on 1/31/23 (Tue). 2. What you CAN still do: Buy 3-mo or 6-mo T-Bills in 1/30/23 (Mon) Auction that will settle on 2/2/23 (Th); order can placed now until early-AM on Monday at most brokerages. You will have a gap of 2 days, 1/31/23 - 2/2/23 when your T-Bill will mature and the proceeds deployed. If you want larger gaps, then more possibilities open up (see schedule). This is why I suggest to initially buy all components of N-yr ladder in the secondary market, and then replace the maturing ones with appropriate Treasuries at Auctions (ideal would be L-yr, but only < L may be available). More I got into buying Treasuries, more nuisances I found. But it may be worth the effort so long as T-Bill rates are higher than m-mkt funds. I sometimes think that Warren Buffet, who has $100+ billion in T-Bills, may be devoting quite a bit of his time and manpower (he doesn't have much, may be only 20-30 people in Omaha) in buying/selling/rolling T-Bills, and may not have time for anything else beyond his daily McDonald breakfasts for which he pays cash with exact change his wife gives him in the morning  . That is billionaire's life! home.treasury.gov/system/files/221/Tentative-Auction-Schedule.pdf
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Post by steadyeddy on Jan 29, 2023 13:54:59 GMT
Fearchar , idea will work for secondaries too but becomes even more tricky. Reason is that in the secondary purchase, you may have bought some other Treasury with 3 months remaining at the time, not a genuine 3-mo T-Bill (at original issue). But continuing this discussion (that may be not be of interest to most posters), let us see what Auction coordination was/is possible with Treasury maturing on 1/31/23. First, look at Treasury Auction Schedule (link below) to see what settles on 1/31/23, or 1-2 days later (say, that is the max gap you want). Then 2 possibilities: 1. What you COULD HAVE done (because the relevant Auction dates 1/24/23 - 1/26/23 are past): You could have bought 4-wk, 8-wk, 17-wk T-Bills; 2-yr, 5-yr, 7-yr T-Notes in the past few days. All these could just settle from the proceeds of your 3-mo maturing on 1/31/23 (Tue). 2. What you CAN still do: Buy 3-mo or 6-mo T-Bills in 1/30/23 (Mon) Auction that will settle on 2/2/23 (Th); order can placed now until early-AM on Monday at most brokerages. You will have a gap of 2 days, 1/31/23 - 2/2/23 when your T-Bill will mature and the proceeds deployed. If you want larger gaps, then more possibilities open up (see schedule). This is why I suggest to initially buy all components of N-yr ladder in the secondary market, and then replace the maturing ones with appropriate Treasuries at Auctions (ideal would be L-yr, but only < L may be available). More I got into buying Treasuries, more nuisances I found. But it may be worth the effort so long as T-Bill rates are higher than m-mkt funds. I sometimes think that Warren Buffet, who has $100+ billion in T-Bills, may be devoting quite a bit of his time and manpower (he doesn't have much, may be only 20-30 people in Omaha) in buying/selling/rolling T-Bills, and may not have time for anything else beyond his daily McDonald breakfasts for which he pays cash with exact change his wife gives him in the morning . That is billionaire's life! home.treasury.gov/system/files/221/Tentative-Auction-Schedule.pdf , info packed post and gave me a few laughs too about Buffet. |
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Post by steadyeddy on Jan 29, 2023 13:57:50 GMT
bruno , which Fido MM shows a 7-day yield of 4.26% ? I do not see SPAXX or FDRXX paying that. FZDXX, Sorry on my Fido positions page it now shows up to 4.28%. , thanks - I notice that min purchase is $100K for FZDXX. Do you know if Fido allows you to keep FZDXX if balance drops below $100K? If yes, I think FZDXX may be a decent alternative to park cash. |
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Deleted
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Post by Deleted on Jan 29, 2023 14:09:42 GMT
FZDXX, Sorry on my Fido positions page it now shows up to 4.28%. , thanks - I notice that min purchase is $100K for FZDXX. Do you know if Fido allows you to keep FZDXX if balance drops below $100K? If yes, I think FZDXX may be a decent alternative to park cash. In a Fidelity IRA, the minimum is $10k. |
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Post by mozart522 on Jan 29, 2023 14:54:19 GMT
I would think MM funds will be higher than 4.66 in two months and may well be at 5% by the time your 6 month T-bill would mature.
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Post by steadyeddy on Jan 29, 2023 15:14:45 GMT
I would think MM funds will be higher than 4.66 in two months and may well be at 5% by the time your 6 month T-bill would mature. , possibly. I guess I will stick with MM for now. In the end, the difference is not that huge. |
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Post by Karen on Jan 29, 2023 15:14:55 GMT
FZDXX, Sorry on my Fido positions page it now shows up to 4.28%. , thanks - I notice that min purchase is $100K for FZDXX. Do you know if Fido allows you to keep FZDXX if balance drops below $100K? If yes, I think FZDXX may be a decent alternative to park cash. Not bruno , but the answer to your question is Yes. And IMO, it is far beyond "a decent alternative to park cash." Until recently, it was fractionally higher than VMRXX (4.30%) which has now fractionally overtaken FZDXX (4.28%). |
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Post by steadyeddy on Jan 29, 2023 15:16:07 GMT
bruno , thanks - I notice that min purchase is $100K for FZDXX. Do you know if Fido allows you to keep FZDXX if balance drops below $100K? If yes, I think FZDXX may be a decent alternative to park cash. In a Fidelity IRA, the minimum is $10k. @haven, I will switch my core position in IRAs to this MM fund. Thank you! |
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Post by Karen on Jan 29, 2023 15:21:14 GMT
In a Fidelity IRA, the minimum is $10k. @haven , I will switch my core position in IRAs to this MM fund. Thank you! Note my post just prior to this post. |
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Post by yogibearbull on Jan 29, 2023 15:31:54 GMT
mozart522, there have been discussion(s) on whether to buy now or wait, and there is a way to analyze that. Assume 3-mo T-Bills to be a proxy for m-mkt funds, even though the best, VG VMFXX at 4.39%, still has some catching up to do with 4.73%. So, whether to buy 3-mo or 6-mo now, or wait for 3 months to buy 3-mo? Look at current 3-mo 4.73%, 6-mo 4.81% (as of Friday). One can buy 6-mo now and expect around 4.81%. Or, 2-step, buy 3-mo now around 4.73%, and another 3-mo in 3 months. But then what would be the rate required in 3 months to beat the 6-mo purchase now? Well, that is 2 x 4.81 - 4.73 = 4.89%. So, you can be ahead by 2-step (buy 3-mo now, then again in 3 months) if 3-mo is more than 4.89% in 3 months (plausible); otherwise, just buy 6-mo now. Note that many projections now are for the fed fund rate to peak in 5.00-5.25% range. And the debate is whether the Fed will actually do that. But investors can make informed decisions in the meantime.
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bruno
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Post by bruno on Jan 29, 2023 15:42:48 GMT
FZDXX, Sorry on my Fido positions page it now shows up to 4.28%. , thanks - I notice that min purchase is $100K for FZDXX. Do you know if Fido allows you to keep FZDXX if balance drops below $100K? If yes, I think FZDXX may be a decent alternative to park cash. Yes, 2 of my 3 accounts are now less than the 10k or 100k required balances to open them. FZDXX is not a core account and if you sell something it goes to SPAXX but its a easy process to trade it for FZDXX. I also am buying 6 month Tbills in my brokerage account to keep from paying state tax. Not sure how much that will save but has to help some. |
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Post by steadyeddy on Jan 29, 2023 16:17:07 GMT
bruno , thanks - I notice that min purchase is $100K for FZDXX. Do you know if Fido allows you to keep FZDXX if balance drops below $100K? If yes, I think FZDXX may be a decent alternative to park cash. Yes, 2 of my 3 accounts are now less than the 10k or 100k required balances to open them. FZDXX is not a core account and if you sell something it goes to SPAXX but its a easy process to trade it for FZDXX. I also am buying 6 month Tbills in my brokerage account to keep from paying state tax. Not sure how much that will save but has to help some. , ah.. so an extra step is needed to buy/sell $ from FZDXX... thanks for clarifying. |
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bruno
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Post by bruno on Jan 29, 2023 16:38:03 GMT
If I remember correct i called Fido to open the FZDXX accounts but after that you can Buy/Sell like usual but it takes money first out of SPAXX. If you get cash DIV it also goes to SPAXX. Before the end of day you just click on FZDXX and choose trade and enter what you have in SPAXX and it moves it overnight.
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Post by Fearchar on Jan 29, 2023 16:57:36 GMT
Here's table plot of CME FedWatch Tool:  Probability of FED funds being over 4.75% is over 90% from March thru June. Doesn't drop below 50% until November. This is based on the Futures market which gradually morphs over time. So, 3 month T-Bill could easily be near 4.89% around May 1st. |
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Post by anitya on Jan 29, 2023 17:12:02 GMT
Yogi, Did you buy 1 yr at auction last week (4.52% while secondaries were paying nearly 20 bps more) or recently in secondary. If not, what are your thoughts on / why avoiding 1 yr Treasuries? Thanks |
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Post by yogibearbull on Jan 29, 2023 17:59:41 GMT
anitya, I am just taking care of my maturing 3-mo T-Bill next week. This was the money I had reserved last year for I-Bonds this year but that I won't buy anymore I-Bonds due poor rate announced on 11/1/22 and the rate collapsing to only 0-2% on 5/1/23 (I would get 6.89% for 6 months, then what?). I have other Treasuries, including 52-wk.
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Post by Karen on Jan 29, 2023 18:36:45 GMT
Yes, 2 of my 3 accounts are now less than the 10k or 100k required balances to open them. FZDXX is not a core account and if you sell something it goes to SPAXX but its a easy process to trade it for FZDXX. I also am buying 6 month Tbills in my brokerage account to keep from paying state tax. Not sure how much that will save but has to help some. , ah.. so an extra step is needed to buy/sell $ from FZDXX... thanks for clarifying. There still seems to be a bit of confusion on this. Maybe not, but just in case, here is what I posted on this thread: big-bang-investors.proboards.com/thread/2208/fidelity-mms-spaxx-fzdxx"...At Fido, FZDXX and any other MMkt $ is available for trading of all BUYs. Conversely at VG, ONLY (settlement fund) $ is available for BUYs of non-VG funds, (CDs, etc). Example: I am planning to BUY a VG brokerage CD very soon. In anticipation of that, I've SOLD $ from VMRXX with the proceeds going to my Settlement Fund (which is VMFXX). Now I can execute the CD BUY. Conversely, at Fido, the cash to BUY anything can be in any MMkt fund. Fido will search all of them. VG will NOT." So, there IS "an extra step" (so to speak) to get money into FZDXX if the money is in your settlement account. But there is NEVER an extra step to get money out of FZDXX. Fido regards ALL money market account $ as "Available for trade" and will search all of them, starting with your core a/c, to execute ALL BUYs. My husband has been doing this for decades. Trust me on this! |
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Post by steadyeddy on Jan 30, 2023 2:26:25 GMT
bruno , ah.. so an extra step is needed to buy/sell $ from FZDXX... thanks for clarifying. There still seems to be a bit of confusion on this. Maybe not, but just in case, here is what I posted on this thread: big-bang-investors.proboards.com/thread/2208/fidelity-mms-spaxx-fzdxx"...At Fido, FZDXX and any other MMkt $ is available for trading of all BUYs. Conversely at VG, ONLY (settlement fund) $ is available for BUYs of non-VG funds, (CDs, etc). Example: I am planning to BUY a VG brokerage CD very soon. In anticipation of that, I've SOLD $ from VMRXX with the proceeds going to my Settlement Fund (which is VMFXX). Now I can execute the CD BUY. Conversely, at Fido, the cash to BUY anything can be in any MMkt fund. Fido will search all of them. VG will NOT." So, there IS "an extra step" (so to speak) to get money into FZDXX if the money is in your settlement account. But there is NEVER an extra step to get money out of FZDXX. Fido regards ALL money market account $ as "Available for trade" and will search all of them, starting with your core a/c, to execute ALL BUYs. My husband has been doing this for decades. Trust me on this! , thank you for taking the time to clarify this item further. Truly appreciate it. |
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. That is billionaire's life!
