Swedish Treasury Bills are in practice unobtainable by the common man on the street as the minimum order is a 1 million SEK. So I am a little bit lost regarding how to save my cash.
I got a few options which I have found available to me, what would you recommend?
Savings account with bank-failure insurance from the government
Mutual fund of Commercial bonds with a duration shorter than 1 year
Mutual fund of State Treasury bonds, Municipal bonds, Mortgages and bonds from very credit worthy companies with a duration between 5 to 15 years
Mutual fund of Inflation compensated bonds with a duration between 5 to 15 years
Last edited by lordmetroid on Fri Dec 05, 2014 3:30 am, edited 1 time in total.
OK, well I don't have any Sweden-specific advice to offer and AFAIK this is the first time a Swedish PP has come up. My first advice is to look thoroughly for a mutual fund or ETF-like vehicle that holds ultra short term (<1 year) Swedish treasury bills. Or, look for a consumer-oriented government savings program like the US Savings Bond program.
If those fail, then you have to accept taking on more interest rate risk and/or credit risk than T-bills. Personally I am more comfortable with rate risk, so I think the second-best option is a short term (1-5 years) Swedish treasury fund. The third-best is an ultra short term (<1 year) fund that includes a mix of corporate and government paper, and it sounds like you have that ("Mutual fund of Commercial bonds with a duration shorter than 1 year"). I don't know about Sweden, but in the US these kinds of funds are usually about 50% Treasuries, so this could be worse.
Another idea that's been discussed is to merge the 25% cash (T-bills) and 25% bonds (long term T-bonds) into a big 50% intermediate-term T-bond allocation. You could try searching for the terms "bullet" and "barbell." This might work well if you have access to an intermediate Treasury fund but no acceptable cash fund.
Finally, I would be interested to know what funds or vehicles you've chosen for the other three assets. It would be nice to document a way of implementing a Swedish PP, in case someone else has the same question.
Hopefully these would be very stable kind of funds. However, the interest may be negative at this time due to the extremely low interest rates of 0% that riksbanken set a month ago.
Hopefully these would be very stable kind of funds. However, the interest may be negative at this time due to the extremely low interest rates of 0% that riksbanken set a month ago.
Well that makes sense, but remember that mortgages and commercial bonds are what will be blowing up in a crisis. More risk for more reward, which is not what you really want to be doing with your cash.
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Savings account with bank-failure insurance from the government
My vote. I'm sure such banks offer CD's too.
Funds are a bad idea due to management fees; leverage and lack of holding to maturity. Capital losses are not guaranteed to make it back when you need it or ever.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
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