Page 1 of 1
Re: CMO/MBS Fund suitable for cash portion of PP?
Posted: Fri Mar 09, 2012 12:52 pm
by craigr
That is probably OK if the Mortgages are US agency backed for your cash. As long as the fund is stable.
Re: CMO/MBS Fund suitable for cash portion of PP?
Posted: Sat Mar 10, 2012 6:55 pm
by craigr
mdsw wrote:
craigr wrote:
That is probably OK if the Mortgages are US agency backed for your cash. As long as the fund is stable.
The Mortgages are US agency backed and the fund itself
guarantees 3.2% at the moment. It almost always guarantees something around 3%.
Just understand the risk. US agency backed does not always mean US govt. backed. Something guaranteeing 3.2% is taking more risk when you consider the typical T-Bill is about 0.1%! That extra 3.1% return is coming from somewhere and that is what would make me curious/concerned.
Re: CMO/MBS Fund suitable for cash portion of PP?
Posted: Sun Mar 11, 2012 3:34 pm
by AdamA
mdsw wrote:
Yeah I understand. But wouldn't you say that the added risk of seeking that extra 3% is relatively nullified by the fact that the 3% is guaranteed?
No!
Re: CMO/MBS Fund suitable for cash portion of PP?
Posted: Sun Mar 11, 2012 5:09 pm
by craigr
mdsw wrote:Yeah I understand. But wouldn't you say that the added risk of seeking that extra 3% is relatively nullified by the fact that the 3% is guaranteed?
Guaranteed by whom?
There were high yield money market funds in some 529 plans that got creamed in 2008's crash for instance. The extra return was wiped out in capital losses.