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Author: imdajunkman Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35361  
Subject: Re: savings in T-bills ? Date: 8/11/2006 8:30 PM
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Blearynet,

Shifting assets around is, at bottom, a timing problem. So let me ask this question: Why weren't you beginning to rotate some money into T-Bills almost two years ago when the Fed began their rate hikes? What that suggests to me, and my apologies in advance if I guessed wrong, is that you don't have in place a principled and disciplined way of making of making yield comparisons, nor a principled and disciplined way of acting on your results, which consists of at least three things: a way of telling “When to get in?” “When to get out?” and “How much?”

Fortunately, fixing those problems is simplicity itself. Pull historical data, create charts, run your numbers, form a plan, and then implement it. And those really are the steps you're going to have to do for yourself. Just because other peoples' situations seem to be similar doesn't mean that they really are. The devil is always in the details, and the downsides of everything have to be considered first, last, and between times. What could go wrong if you did what you propose? If you truly can't find any downsides, and the upside looks significant, then go for it, because you'll then be doing so in a fully informed manner that you understand, because you built the plan, not someone else.

But remember this caveat: Nobody but nobody can predict the future. To assume that the present trend will continue is just that, an assumption. When the trend changes, and it will (which isn't a prediction, but rather a tautology), you need a way of knowing that the trend has changed and you'll need a plan already in place as to what to do next. Yes, right now, especially for us high state-taxes people, T-bills are a sweet spot compared to other alternatives. How long will that trend continue? Who knows? Are T-bills a useful asset class whose consideration should be a staple of one's financial planning? For sure. Can a small investor generally beat the yields offered by Money Market funds? Yes. A lot of very positive things can be said about T-Bills and the Treasury's program generally. But it's your own numbers and situation that matters, and only you can decide what is best for you.

A tiny suggestion: import the data you need to compare into a spreadsheet and then plot it such a way that you can see general trends, not just isolated spikes. Work with the data until you can gain a real feel for it, and you are in synch with its moves. Then start making your plans. Don't try to tell the data what you want to see. Let it do the talking. Just listen. It will tell the story it wants to tell, and it will share a bit of its wisdom. Your data is your partner, and between the two of you, you'll come up with a good plan.


Charlie

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