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Is Cash the Safest Asset Right Now? ETFs in Focus

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The second wave of coronavirus is hitting worldwide, crippled the investing world again with uncertainty. Volatility may become the name of the game ahead thanks to a host of factors ranging from rising coronavirus cases in the United States, tensions with China and the resultant pressure on global growth, geopolitical issues and uncertainty around the presidential election (read: Sector ETFs to Win or Lose if Blue Wave Sweeps U.S. Election).

J.P. Morgan Chase CEO Jamie Dimon said after second-quarter earnings, “we simply don’t know” what will happen next with the U.S. economy. Though wealthy Americans still have faith in the market rally and the economy, their fear for stock investing can’t be ignored.

The percentage of wealthy investors, who said they would be moving out of cash and into new positions, dropped from 24% to 7%, according to the E-Trade survey, as quoted on CNBC. The TIGER 21 investment club for super-rich investors has seen cash levels among its members hit an all-time high, as pointed out in the CNBC article.

A June poll of TIGER 21 members reported that ultra-rich investors increased cash levels up to 19%. “This is the largest, fastest change in asset allocation in more than a decade we’ve been doing it,” per Michael Sonnenfeldt, founder of TIGER 21, quoted on CNBC.

Why Hoarding Cash Makes Sense Now  

Investors sold their possessions to retain money in the wake of the unparalleled uncertainty caused by a surge in new virus cases in the country. The road ahead is a bit unclear now despite massive Fed and government support.

So, it’s more important for businesses and individuals to cover day-to-day expenses now, more so at the time of lesser employment opportunities. Analysts believe cash and short-dated fixed income may play a greater role in adding stability to a portfolio. Sentiment among clients now ranges from “cautious to fearful,” said Bruce Weininger, principal and senior financial advisor at Chicago-based wealth management firm Kovitz, reported on CNBC.

Below we highlight a few money-market ETFs and their performance plus yields.

PIMCO Enhanced Short Maturity Active Exchange-Traded Fund (MINT - Free Report)

The 30-day SEC yield is 2.11% annually. Its estimated yield to maturity was 0.90% as of Jul 17, higher than the benchmark U.S. treasury yield 0.64%. It has gained 0.3% in the past month (see all Money Market/Ultra-Short-Term ETFs here).

SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL - Free Report)

The underlying Bloomberg Barclays 1-3 Month U.S. Treasury Bill Index includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250 million or more of outstanding face value. It yields 1.21% annually.

iShares Short Treasury Bond ETF (SHV - Free Report)

The fund tracks the ICE U.S. Treasury Short Bond Index. Weighted average maturity of the fund is 0.37 years. The fund yields 1.57% annually.

iShares Ultra Short-Term Bond ETF (ICSH - Free Report)

Its effective duration is 0.42 years while the 30-day SEC yield is 0.67% annually. It has gained 0.13% in the past month.

JPMorgan Ultra-Short Income ETF (JPST - Free Report)

Its 30-day SEC yield is 0.72% while its duration is only 0.97 years. It has added 0.3% in the past month.

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