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More Ways To Stash Your Cash: V

Posted by: Lauren Young on July 29, 2008

Looking for places to stash cash? Here’s today’s asset allocation plan from Dan Crimmons, President and Founder of DPC Wealth Management in Ramsey, New Jersey.

Amount Instrument

$500,000 DFA One-Year Bond Fund
$300,000 Vanguard Prime Money Market
$200,000 Two online bank CDs

Crimmons says: “With the safety of the principal being of paramount concern, our portfolio consists of only short-term, highly rated government and corporate bonds, a well-run money market account, and FDIC insured bank CDs.

“We would start with $500,000 (50%) of the portfolio invested in short-term high quality bonds such as those found in the DFA 1 year bond fund (DFIHX). Currently, the average holding maturity for this is bond fund is under one year (0.74 years) while its average credit quality is A1+, the strongest rating for short-term issue holdings. The goal of this fund is real returns in excess of the rate of inflation with a minimum of risk. The expense ratio is 0.18%. If one is in a high tax bracket, one could also consider an alternate short term municipal bond fund.

“We would also invest $300,000 in the Vanguard Prime Money market which currently has a 7-day annualized yield of approximately 2.2%. This liquid fund has an average asset quality of AAA (strongest rating) and its average maturity is under two months. In addition, this fund, which has an expense ratio of 0.24%, has over $100 billion in assets. If one is in a high tax bracket, one could also consider an alternate tax-exempt fund.

“Lastly, we would invest the remaining $200,000 into two different bank CDs. Investing a $100,000 in each bank would allow for F.D.I.C. insurance protection (or if you open a joint account the full $200,000 would be covered). One should invest in these CDs through on-line access for the better rates. Some suggestions include One-Year CDs from WaMu and Wachovia (currently approximately 4.17%). This money will be required to be locked up for the entire year to avoid penalties unlike the first two options which remain liquid.”

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