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Author: aleax Big gold star, 5000 posts Top Favorite Fools Global Fool Pro Community Winner Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2534  
Subject: Re: Best Place to Park Cash? Date: 1/15/2011 4:55 PM
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"High-rate" online savings accounts (FDIC-insured and all) can currently give you between 1.20 and 1.30% APY (ally.com has some, others are offered at Discover for aaii.com members, &c) and may be suitable.

No-penalty CDs (where you can cancel w/o penalty at any time, but not as suitable for monthly extraction of small fractions or further deposits in some months) can offer a bit more, maybe 1.40% to 1.50% APY (again check ally.com &c). I think they're probably better used for some portion of your "non-investable emergency reserve cash" (with other portions in longer-term and higher-yielding CDs) rather than for "parking investable cash for a month or so at a time". DO make sure that they're FDIC-insured, that there are no semi-hidden fees, &c.

Admittedly the difference between yearly 1.20%, 1.50%, and 0% (what your broker probably pays you for cash just left parked there) ain't much on a one-month basis on reasonably small amounts -- e.g. for (say) $100K, we're talking about $100 vs $125 vs nothing; if (e.g.) wire transfer fees or delays enter the picture, and especially for smaller amounts, it may not be worth the bother.

But, all other instruments aren't really cash-equivalent. E.g. LTPZ, a Pimco TIPS index fund, lost 0.68% yesterday, lost 1.5% on Jan 4 (and gained 12% over a year) -- very far from what cash should be doing, in either case. It may or may not be worth a place in your portfolio, depending of course on your approach to diversification, but, don't fool yourself that it's a "cash-equivalent" place to park your dough!-)
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