Bloomberg Wealth: Cash Is King

Stocks got you feeling down? Cash can lift your spirits. 

That’s the takeaway from a recent Bloomberg survey in which two-thirds of respondents said cash in their portfolios would boost their performance this year. Check it out

The results reflect a volatile start to 2023 for both stocks and bonds. In fact, cash is delivering bigger payouts than the traditional 60/40 portfolio as the Federal Reserve continues to raise interest rates. 

The bright spot is that products designed to store cash — think high-yield savings accounts and certificates of deposit — are offering some of their best rates in years. 

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The popularity of products like Treasury bills and money market funds are leading to outflows from commercial banks, which saw deposits fall last year for the first time since 1948. Some financial firms are fighting back by raising rates — a development that my colleague Alexis Leondis says is long overdue

The US is actually ahead of the curve on this one. Banks abroad are facing pressure from politicians and regulators to up their rates. 

And American savers could even see better cash options later this year, as the Federal Reserve is poised to continue raising benchmark interest rates

So where’s the best place to put your cash? 

Shawn Cruz, director of derivative product strategy at TD Ameritrade, recommends short-term US Treasury bills to earn yield while still keeping your cash liquid. These can be purchased through TreasuryDirect.gov with a minimum of $100, if you can manage to navigate the notoriously wonky website. He likes the ones that mature in one or two months, which both yield above 4.5%.

Meanwhile, Leyder Murillo, managing director at Wolfpack Wealth Management in Colorado, is building CD “ladders” for clients — putting money into multiple CDs with different maturity dates so the cash is periodically freed up. 

For those willing to lock up their cash a bit longer, Eric Roberge, certified financial planner in Boston, likes . They currently have a rate of 6.89%. 

And if you need an incentive to save, check out my recent story on the costs of dating in New York. Even if you’re happily partnered, the shock value of the high prices for eating out and entertainment will make you want to stay in. I’m speaking from experience. — Claire Ballentine

Send us questions about your own financial dilemmas to [email protected]or fill out this form

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Bloomberg Opinion this week, Alexis Leondis cautions against mortgage lenders’ advice to “buy now, refinance later”:

New homeowners may come to find they’re in a longer-term relationship with today’s rate than they expected. Yes, for the last 10 years (before last year’s uptick) rates were much lower, averaging 3.78%. But that doesn’t mean they’ll drop back to those levels anytime soon. In fact, the bond market is starting to price in higher benchmark interest rates following stronger economic data.

Homebuyers now need to make sure they’re OK with the rate for the longer haul — especially if they might be on the hook for other big expenses, like renewed student loan payments. Telling someone they can be more noncommittal is just irresponsible.

Read her full argument

Financial FAQ

Do I have too many tech stocks in my 401(k)? 

When it comes to tech stocks and your 401(k), if you have exposure to large-cap US equities you are likely invested heavily toward technology. Determining if there is too much depends on appetite for risk and how many years until these dollars are needed. Also consider if you’re employed in the tech industry. We’re finding some concentration when we factor in human capital like bonuses and executive compensation. If that is caused by being in tech company, we want to make sure we have a diversified portfolio that is offsetting some of the concentration. In general, it’s important for investors to review their 401(k)s and investments on a regular basis. The key is to have a diversified portfolio that can withstand market volatility.

Nicole Birkett-Brunkhorst, wealth planner at US Bank Private Wealth Management

Send us questions about your own financial dilemmas to [email protected]or fill out this form

The Bloomberg Invest series returns to London on March 22, gathering leading financial thinkers in investing to identify the biggest risks and greatest opportunities facing those in the region. From traditional investment tools to crypto to alternative assets, how should we put our money to work now? Join in London or online to hear from executives from Blackstone, QuantumLight, and Sotheby’s. Register here