I've recently started using the PP style and I think I'm coming to terms with the basics. I now have a portfolio which is broadly speaking 25% gold, 25% 30yr gilts, 25% stocks and 200% cash (I have a large cash element as an emergency fund - how and when, or even if, I migrate some of that 'surplus' over to the PP is a question for another day...)
What I'm not sure about is how to hold the cash element, particularly as most of the discussion I've read is US-centric and I'm not sure how it translates into UK terms.
The cash holdings are at the moment mainly in Cash ISAs (tax-free 2.75%), Premium Bonds (tax-free, never won anything ) and 'ordinary' immediate access savings accounts (taxable 2.8%). All the cash accounts are under the savings guarantee limit.
Frankly, I don't really understand what a money-market fund is (and what the UK equivalent for the Treasury Money Market fund is). I found a couple of funds called 'Money Market Funds' = eg. the Fidelity or the LV=, both of which seem to have earnt about 0.14% over the last year and have a TER of 0.60%. I understand that you can use Treasury short term gilts as a substitute, but again the yields are much lower than the 2.75% I'm already earning. (The rates aren't above inflation, of course, but they're not far off the best you can get at the moment for immediate access.)
Given the woeful state of my ignorance displayed above, I'd be very grateful if anyone who understands these things better could help me out...
- What is the UKequivalent, if any, of the US Treasury Money Market Fund?
- There is an iShares 0-5 year Gilts ETF (IGLS). Would this be an acceptable substitute?
- What advantages does a MMF (or the ETF) have over the savings situation I have now, given that I appear getting a better return, have a guarantee of safety, and the savings accounts don't cost me anything in commission?