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How To Earn More On The Cash You’re Stashing

Saturday, July 9, 2011 - 10:58 PM
From MarketWatch
For investors unsettled by repeat warnings of debt crises and economic slumps, cash deserves a second look. And a third and fourth.

Thanks to the exposure of many money-market funds to European bank debt, and the ultralow yields on other cash-like alternatives, allocating a bigger chunk of your savings to cash requires a reassessment of your risk — and the type of reward you expect.

The first thing to consider is how long you expect to keep your funds in cash. For some, that can be three to five years, making certificates of deposit more attractive. For those who want to access the cash within six months, high-yield savings and money-market funds may offer a better option.

Choosing the right vehicle for cash savings also depends on how soon you expect interest rates to rise, which is a big wild card. Interest-rate-futures traders and Wall Street economists expect the Federal Reserve to raise its target fed funds rate sometime between spring and fall of 2012....

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