Replies to post #36295 on A.I.M. Users Bulletin Board (AIMUSERS)

[Toofuzzy]

Hi RCA

If you already had SOME in a long term bond fund, that would be OK, but now is the wrong time to put new money in to one. If interest rates go up, long term funds will crash asn burn.

Toofuzzy

[OldAIMGuy]

Re: Cash Alternatives.................
Hi R, Almost anything you do with the cash will have higher risk than money market funds or a savings account. The biggest risk going forward will be interest rate direction. That said, there are some things one can buy that yield a bit better and have relatively low interest rate risk.

SHY is a 1-3 Year Treasuries fund. With the short duration the interest rate risk is relatively low and the recovery should be quicker when there is a move upward in interest rates.

HYS is another shorter term income fund. It invests in corporate short term debt. The quality isn't stellar, but the short duration at least keeps the interest rate risk more moderate. The yield is quite good.

Maybe a blend of money market funds, SHY and HYS could give you some improvement in yield on cash while keeping the risk somewhat moderated.

The last thing you want to have happen is to have your "cash and equivalents" going down at the same time your equities are. Then you're forced to sell something at a loss to buy some more of something else that has been falling in price. This isn't a comforting thing to do.

Best regards,

[Adam]

Hi Rca, Some funds I'm using to boost cash returns are: PFF, BOE, EAD and the reit VNQ. I have about 25-30% true cash at present time and another 15% in those high dividend funds.