Cash is what most of us look at as our most liquid of assets. We measure it every time we open our wallets or look at our checking and savings balances. It has become a very popular topic in the last year for many reasons, including that asset liquidity and near-cash investments have been growing at a higher rate than previous years.
In our current economic climate, we have clients that are very comfortable with a portion of their assets invested in LPL’s Insured Cash Account (ICA). ICA provides an attractive combination of security and liquidity. It’s still a great choice, but now, may come at a high price in terms of interest foregone. As of December 21, 2022, ICA was yielding less than 0.50% for balances below $750,000.
In today’s market, yields of 3.00% or higher are readily available on near-cash assets for those with at least $10,000 to invest.
Arbor provides two options that yield considerably more than ICA:
1) The JP Morgan Liquid Assets Money Market Fund (PJLXX). This Money Market Fund currently provides a net-of-fee yield of 4.0%* with daily liquidity. While not FDIC insured, JP Morgan is extremely well capitalized and committed to preserving the principal of your investment.
2) Exchange Traded Certificates of Deposit (CDs). These CDs are currently available with net-of-fee yields of more than 4.00% if one is willing to commit to holding them for at least three months. They provide an explicit government guarantee of up to $250,000 for CDs purchased from any individual issuing bank. (What this means is that you can fully insure a $1,000,000 investment by purchasing $250,000 in CDs from four different banks.) The challenge with a CD is the lack of liquidity. The only way to withdraw cash before the CD matures is to sell it in the open market. If the selling price is lower than the purchase price, you risk both interest and principal.
There are many ways one can take advantage of these types of investments. We encourage you to reach out to your financial advisor to discuss what may be the right options for you and answer any questions you may have. Please reach out to our main office number (630) 701-9080 or email info@ArborFinancialServices.com to set your appointment today.