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Cost vs. Value. And How Money Fits In.

Excerpts from a great post great post by Seth Godin:

“Five dollars to buy a snack box on an airplane is worth something very different than five dollars to buy a cup of coffee after a fancy meal, which is worth something different than five dollars in the grocery store. That’s because we get to pretend that the five dollars in each situation is worth a different amount.”

“Cost isn’t abstract, but value is.”

Cash Plus: Our Cash Strategy

We’ve built a cash strategy for Tier II and Tier III for investors with lots of cash sitting on the sidelines earning next to nothing.

We are recommending a short-term bond portfolio as outlined earlier. It would consist of 5-6 conservative bond investments, reviewed frequently and rebalanced every year. Effort is placed to minimize risk, diversify bond maturities and bond types through a combination of active and passive investments.

Other  features:

Funds can be wired from this account to your bank account in as little as three days.

You can sign up for free check writing privileges from the account.


Contact us today if you’re interested in making your cash work harder.


Creating a Cash Strategy

Your cash strategy should consist of three tiers, with each one having a specific objective:

Tier I: Immediate

Objective: Meets your immediate needs to pay bills and serve as your emergency cash fund.

Products to use: Focus on bank deposits and money market funds

Tier II: Enhanced Cash

Objective: Enhance returns to cash while maintaining liquidity

Products to use: Low duration bonds

Tier III: Return Driver

Objective: Grow cash balance over time

Products to use: Core bonds or actively managed bond funds

The allocation between each of these tiers will depend on several factors – including risk tolerance, goals and spending patterns.

We can help to analyze how much you need for each tier based on your needs. Contact us today if you’re interested in making your cash work harder.

A Step Out On the Risk Curve From Cash

Cash and money market funds pay next to nothing but then again you aren’t taking on much risk. If you’re exploring what to do with cash but not ready to go in stocks just yet, the next logical step is to look into short term strategies.  A little extra risk for a little extra potential reward.

Money Market Cash


Chart from PIMCO



Contact us today if you’re interested in making your cash work harder.


Analyzing the Pros and Cons of Where to Park Cash

The common options for cash can be complex and confusing.  These tend to be the three most common options:

Bank Deposits


Stable  and often insured

Easily accessible.

Flexible rates.  They can increase


Very low rates on deposits.  You’re lucky if you can find anything over 0.50% on bank deposits.

They will most likely stay below the long term inflation rate of 3%.


High Yield Savings Accounts


Typically has higher interest rates than bank deposits. Similar to Money Market funds.

Most likely insured.

Flexible rates that could exceed 3%.


Minimal customer service. Mostly done online.

Can be difficult to make deposits or withdrawals.


Certificates of Deposit


Better rates than Bank Deposits.


Subject to early withdrawal penalties.

Subject to interest rate risk.


Money Market funds


Returns may fall somewhere in between rates Bank Deposits and CDs.

No early withdrawal penalty.

Stable value of principal.


There can be declines in the portfolio.  It’s rare, but still possible.

Not insured.


Short Term Bond Strategy


Potential for better and higher REAL returns. (Real Return is the rate of return when you factor in inflation).

Diversification across multiple sectors and durations to minimize risk.


The value will fluctuate slightly.


Contact us today if you’re interested in making your cash work harder.

The Role Cash Serves in a Portfolio

Cash in a portfolio should have a specific role in a portfolio. We see cash as fitting in one of these three categories:

  • Liquidity provisions: this is to cover expenses and emergency funds.  This includes money to pay for the mortgage, the unexpected new roof, basic living expenses, etc.
  • Defensive position: Cash in this pot acts as a cushion against stock/bond volatility.
  • Offensive position:  In some cases, we recommend keeping higher levels of cash until trends in the market change.  In this case, we maintain cash reserves for future investments.

How much cash in each category depends on your expense pattern, your goals and risk tolerance.

Contact us today if you’re interested in making your cash work harder.