T-Bills vs a Bank

Discussion of the Bond portion of the Permanent Portfolio

Moderator: Global Moderator

Post Reply
ppnewbie
Senior Member
Senior Member
Posts: 124
Joined: Fri May 03, 2019 6:04 pm

T-Bills vs a Bank

Post by ppnewbie » Tue Feb 18, 2020 12:48 am

If you had a decent size chunk of cash in the bank that is not associated with the HBPP - would you put it in t-bills at treasury direct (maybe create a ladder up to a year) or would you put the money in a vanguard treasury MM? Basically, I want my money out of the bank - plus I want to stop the bleeding of negative real interest rates.

I figure t-bills are liquid enough that I could sell the bills if I needed the cash. It also removes the risk of a bank failure (I wear a tin foil hat).
User avatar
sophie
Executive Member
Executive Member
Posts: 3317
Joined: Mon Apr 23, 2012 7:15 pm

Re: T-Bills vs a Bank

Post by sophie » Tue Feb 18, 2020 8:03 am

Yes you could do a T bill ladder with autoroll (depending on where you want to keep the cash). However, it's probably a good idea to keep a buffer of liquid cash in an account that can be accessed, say, to pay a credit card bill.

A nice solution is a Fidelity brokerage account that is separate from your investment account. The brokerage account can do everything that a checking account does except let you pull cash out of an ATM. I have my core account set to FZFXX (40% treasuries), and keep as much of my buffer cash as possible in FDLXX (100% treasuries). Bills are paid from the core account with ability to draw from the treasury MM if needed. If I wanted to, I could take cash over and above the buffer amount to buy T bills. But note, you can't draw automatically from a T bill, you have to manually sell it and wait for it to settle before you can use the money to pay a bill.
User avatar
dualstow
Executive Member
Executive Member
Posts: 9679
Joined: Wed Oct 27, 2010 10:18 am
Location: next to emotional support peacock
Contact:

Re: T-Bills vs a Bank

Post by dualstow » Tue Feb 18, 2020 8:07 am

I do and I did. I put them into t-bills, but in Vanguard and Fidelity. I don’t like Treasury Direct’s website and only use them for I-bonds and other instruments that I cannot hold elsewhere.

I keep enough 💵 in the bank, like Sophie said, to pay bills and if a surprise bill comes along, it would be easy enough to transfer from a brokerage house to the bank without selling stocks.
User avatar
Kriegsspiel
Executive Member
Executive Member
Posts: 2204
Joined: Sun Sep 16, 2012 5:28 pm

Re: T-Bills vs a Bank

Post by Kriegsspiel » Tue Feb 18, 2020 9:40 am

I also used Treasury bills instead of a bank for a big chunk of money. Another perk is avoiding state income tax on the interest from Treasuries.
All of humanity’s problems with coronavirus stem from a man’s inability to sit quietly in a room alone.
- Blasé Kriegsspiel
User avatar
pugchief
Executive Member
Executive Member
Posts: 3216
Joined: Tue Jun 26, 2012 2:41 pm
Location: suburbs of Chicago, IL

Re: T-Bills vs a Bank

Post by pugchief » Tue Feb 18, 2020 2:11 pm

sophie wrote:
Tue Feb 18, 2020 8:03 am

A nice solution is a Fidelity brokerage account that is separate from your investment account. The brokerage account can do everything that a checking account does except let you pull cash out of an ATM.
You may have answered this elsewhere, but Fido offers a debit card which can be used for ATM withdrawals. Do you have some restriction?
User avatar
dualstow
Executive Member
Executive Member
Posts: 9679
Joined: Wed Oct 27, 2010 10:18 am
Location: next to emotional support peacock
Contact:

Re: T-Bills vs a Bank

Post by dualstow » Tue Feb 18, 2020 2:16 pm

Here it is if anyone wants to read up on it.
https://www.fidelity.com/cash-management/atm-debit-card

Side note: although my bank essentially pays zero interest, it does give me a free safe deposit box, the largest one, in return for maintaining a balance. It's nice not having to think about the bill, even if I could get a few $ interest by moving to a money market fund. I need this account anyway for utilities that don't accept credit cards. They draw directly from the bank.
User avatar
sophie
Executive Member
Executive Member
Posts: 3317
Joined: Mon Apr 23, 2012 7:15 pm

Re: T-Bills vs a Bank

Post by sophie » Tue Feb 18, 2020 2:30 pm

pugchief wrote:
Tue Feb 18, 2020 2:11 pm
sophie wrote:
Tue Feb 18, 2020 8:03 am

A nice solution is a Fidelity brokerage account that is separate from your investment account. The brokerage account can do everything that a checking account does except let you pull cash out of an ATM.
You may have answered this elsewhere, but Fido offers a debit card which can be used for ATM withdrawals. Do you have some restriction?
Oh, I should explain: the cash management account can be set up to draw on the "checking" brokerage to cover ATM withdrawals. Its core fund pays practically zero interest, plus it has all kinds of restrictions on auto transfers, so I much preferred the standard brokerage account for all other banking functions.

BTW the treasury-only MM also avoids state income tax, even in NY and California. The treasury core fund (FZFXX) unfortunately doesn't qualify because the interest is only 40% US government. Still, having your main checking account act like a high interest savings with ability to hold money market funds and T bills within it, AND bypass the 6 transaction limit, is pretty darn cool.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 2566
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: T-Bills vs a Bank

Post by mathjak107 » Sat Feb 22, 2020 5:00 am

we just opened citi bank accounts and walked away with 1100 bucks in bonus dollars ..

we got 700 bucks for putting in 50k for 5 months , plus 100 dollars as a finders fee for my wife opening a smaller account and her getting 300 dollars for that account .
User avatar
dualstow
Executive Member
Executive Member
Posts: 9679
Joined: Wed Oct 27, 2010 10:18 am
Location: next to emotional support peacock
Contact:

Re: T-Bills vs a Bank

Post by dualstow » Fri Feb 28, 2020 7:08 pm

One thing I like about T-Bills vs a money market fund or bank has to do with so-called mental accounting.
Even as I put new money into stock purchases, I was buying long bonds and six-month t-bills alongside that.

It sounds silly, but once I put cash into t-bills I tend to leave that money alone until it matures. Anything in a money market account is a temptation to buy more stock in the vp. It is only because of t-bill purchases that I didn’t put everything into stock this month.

(In the pp, I do play by the rules).
User avatar
jhogue
Executive Member
Executive Member
Posts: 438
Joined: Wed Jun 28, 2017 10:47 am

Re: T-Bills vs a Bank

Post by jhogue » Sat Feb 29, 2020 10:43 am

I keep both T-bills and a Treasury money market fund in Cash. It does not have to be one or the other, you can have some of each.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
Post Reply