Making Money on Cash

Nearly a year ago, the Federal Reserve embarked on the fastest interest rate hiking program in its history.  Last year this presented a challenge to all asset classes except one—cash. While the investment market is rebounding nicely this year for stock and bond investors, what about making money on your cash savings?

For years, savers have received paltry returns for their savings, but the Federal Reserve changed that last year as they aggressively raised rates.  At Riggs, we have been taking advantage of this opportunity by moving cash into a U.S. Government and Treasury Money Market, yielding well over 4%.  We believe this yield will continue to rise as the Federal Reserve continues to raise rates to fight inflation.

Money market investments offer a number of advantages for people looking to save and grow their money. They provide higher earning potential than traditional bank savings accounts, with competitive interest rates that can be up to 10 times higher. The money market we use at Riggs is fully liquid, so there is no fixed holding term (like a Certificate of Deposit may have), and the minimum investment is as low as $1.  In essence, you have a fully liquid home for cash, earning more than 4% annually.  This is an opportunity for individual savers but also for businesses that hold large cash balances. 

Finally, while banks offer FDIC insurance limited to $250,000 per individual depositor, Schwab and TD Ameritrade provide Securities Investor Protection Corporation (SIPC) insurance.  SIPC provides up to $500,000 of protection for brokerage accounts held in each separate capacity (e.g., joint tenant or sole owner), with a limit of $250,000 for claims of uninvested cash balances (money markets would fall under the $500,000 protection limit).  In addition to SIPC protection, Schwab and TD have purchased additional insurance for accounts through underwriters in London. Their coverage with Lloyd’s of London and other London insurers, combined with SIPC coverage, provides protection of securities and cash up to an aggregate of $600 million and is limited to a combined return to any customer from a Trustee, SIPC, and London insurers of $150 million, including cash of up to $1,150,000. This additional protection becomes available if SIPC limits are exhausted.  This provides an additional layer of security and peace of mind to Riggs clients, who often ask us to open up a cash account for them to park their significant savings balances.  With a Riggs account, we can set up electronic moneylink so that you can easily transfer money from your Riggs account to your bank account when you need it.

For savings that you want to hold long-term but in low-risk instruments, we are utilizing U.S. Treasury securities where 1-year U.S. Treasuries are now yielding 5.24% (as of March 8, 2023).  Regardless of where you place your cash, the point is to remember that we are in a period where you can make money on that cash, and we recommend that all of our clients take advantage of that opportunity. 

IMPORTANT DISCLOSURES
Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Riggs Asset Management Company, Inc. (“Riggs”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Riggs.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Riggs is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of the Riggs’s current written disclosure Brochure discussing our advisory services and fees is available upon request.

  Please Note:   If you are a Riggs client, please remember to contact Riggs, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Riggs shall continue to rely on the accuracy of information that you have provided.