Gyroscopic Investing

Thoughts on extending the duration of deep cash, to juice a little extra yield?

For example my cash portion would be:

15% TBills
5% IBonds
5% ~5 year Bond Fund

This should give me more than enough for a rebalancing event, extra yield, and not a dramatic increase in volatility.

If you did a 1-5 year ladder with the bottom 25%-50% of your cash holdings, that wouldn't be a crazy thing to do IMHO from a risk/reward perspective, especially for a person in the accumulation stage.

It is, of course, straying from the pure PP concept, and introduces additional risk that could undermine the all-season sturdiness of the PP, but for someone who knows what he's doing this might be something to think about.

I think this is one of those situations where your mileage will vary. IF you have enough money in hard cash (T Bills or damn close to it) that you wanna go out on a limb with say 5-10% then fine. But remember that there is risk there too. If we have seen the end of the 30 year bull market and are now entering a potentially multi year bear market in bonds, trying to juice your cash could cost you money as interest rates continue to rise.

MediumTex wrote: If you did a 1-5 year ladder with the bottom 25%-50% of your cash holdings, that wouldn't be a crazy thing to do IMHO from a risk/reward perspective, especially for a person in the accumulation stage.

It is, of course, straying from the pure PP concept, and introduces additional risk that could undermine the all-season sturdiness of the PP, but for someone who knows what he's doing this might be something to think about.

You could also buy EE savings bonds.  If you hold them for 20 years, you'll get 3.5% a year (but only if you hold them for 20 years).

MediumTex wrote: If you did a 1-5 year ladder with the bottom 25%-50% of your cash holdings, that wouldn't be a crazy thing to do IMHO from a risk/reward perspective, especially for a person in the accumulation stage.

It is, of course, straying from the pure PP concept, and introduces additional risk that could undermine the all-season sturdiness of the PP, but for someone who knows what he's doing this might be something to think about.

I find this approach to be more and more interesting....how do I quantify the additional risk of holding, say, a 3 year T-note to maturity?

Desert wrote: ... the PenFed 3.04% CD's are where I'm putting cash right now.  I don't see any other options that come close to that yield.  I'd have to go out to 10 year maturity in treasuries to get 3% yield. 

3% yield, locked in, sounds good until the inflation rate reaches 4% 

Same goes for holding EE bonds for 20 years. 

For me, it's I-Bonds all the way, baby