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Is Hoarding Cash a Safe Bet Right Now? ETFs in Focus
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The Omicron variant of coronavirus is hitting worldwide, which, in turn, has 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 Omicron cases in the United Kingdom, a likely hawkish Fed, worldwide supply chain disruptions and the resultant price inflation and last but not the least tensions in China’s property market.
Though Americans still have faith in the market rally and the economy, their fear for stock investing can’t be ignored. Bank of America's monthly fund manager survey out Tuesday revealed that cash allocation among investors surged 14 percentage points in December from November.
Fund managers were net 36% overweight cash, the highest allocation to the asset class since May 2020, as quoted on a Yahoo article. Besides cash, investors also focused on defensive sectors of the market such as health care and REITs.
Why Hoarding Cash Makes Sense Now
Investors tried to retain money in the wake of the uncertainty in recent weeks caused by a surge in new virus cases in the world. The road ahead is a bit unclear now with the longevity of the pandemic and the central banks’ likely hawkish decisions. Further massive fiscal support is also unlikely ahead.
So, it’s more important for businesses and individuals to pile cash for day-to-day expenses now. With so much of uncertainties lingering, future investment decisions appear a bit tricky. We believe cash and short-dated fixed income may play a greater role in adding stability to a portfolio. Sentiment among investors may be ranging from cautious to fearful now, but may prove to be upbeat if the Fed offers a less hawkish signal for its future course of policies.
Till then, investors can try out a few money-market ETFs.
PIMCO Enhanced Short Maturity Active Exchange-Traded Fund (MINT - Free Report)
This ETF is active and does not track a benchmark. Its estimated yield to maturity was 1.13% as of Dec 13. The fund charges 35 bps in fees.
The underlying Bloomberg 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.
The underlying ICE Short US Treasury Securities Index intends to assess U.S. Treasury issued debt. Only U.S. dollar denominated, fixed rate securities with minimum term to maturity greater than one month and less than or equal to one year are included.
This ETF is active and does not track a benchmark. ICSH looks to provide income by investing in a broad range of short-term U.S. dollar-denominated investment-grade fixed- and floating-rate debt securities and money market instruments. However, ICSH is not a money market fund. Average Yield to Maturity is 0.45%.
The JPMorgan Ultra-Short Income ETF seeks to achieve its investment objective by primarily investing in investment grade, U.S. dollar denominated short-term fixed, variable and floating rate debt. The 30-Day SEC Yield of JPST is 0.43%.
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Is Hoarding Cash a Safe Bet Right Now? ETFs in Focus
The Omicron variant of coronavirus is hitting worldwide, which, in turn, has 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 Omicron cases in the United Kingdom, a likely hawkish Fed, worldwide supply chain disruptions and the resultant price inflation and last but not the least tensions in China’s property market.
Though Americans still have faith in the market rally and the economy, their fear for stock investing can’t be ignored. Bank of America's monthly fund manager survey out Tuesday revealed that cash allocation among investors surged 14 percentage points in December from November.
Fund managers were net 36% overweight cash, the highest allocation to the asset class since May 2020, as quoted on a Yahoo article. Besides cash, investors also focused on defensive sectors of the market such as health care and REITs.
Why Hoarding Cash Makes Sense Now
Investors tried to retain money in the wake of the uncertainty in recent weeks caused by a surge in new virus cases in the world. The road ahead is a bit unclear now with the longevity of the pandemic and the central banks’ likely hawkish decisions. Further massive fiscal support is also unlikely ahead.
So, it’s more important for businesses and individuals to pile cash for day-to-day expenses now. With so much of uncertainties lingering, future investment decisions appear a bit tricky. We believe cash and short-dated fixed income may play a greater role in adding stability to a portfolio. Sentiment among investors may be ranging from cautious to fearful now, but may prove to be upbeat if the Fed offers a less hawkish signal for its future course of policies.
Till then, investors can try out a few money-market ETFs.
PIMCO Enhanced Short Maturity Active Exchange-Traded Fund (MINT - Free Report)
This ETF is active and does not track a benchmark. Its estimated yield to maturity was 1.13% as of Dec 13. The fund charges 35 bps in fees.
SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL - Free Report)
The underlying Bloomberg 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.
iShares Short Treasury Bond ETF (SHV - Free Report)
The underlying ICE Short US Treasury Securities Index intends to assess U.S. Treasury issued debt. Only U.S. dollar denominated, fixed rate securities with minimum term to maturity greater than one month and less than or equal to one year are included.
iShares Ultra Short-Term Bond ETF (ICSH - Free Report)
This ETF is active and does not track a benchmark. ICSH looks to provide income by investing in a broad range of short-term U.S. dollar-denominated investment-grade fixed- and floating-rate debt securities and money market instruments. However, ICSH is not a money market fund. Average Yield to Maturity is 0.45%.
JPMorgan Ultra-Short Income ETF (JPST - Free Report)
The JPMorgan Ultra-Short Income ETF seeks to achieve its investment objective by primarily investing in investment grade, U.S. dollar denominated short-term fixed, variable and floating rate debt. The 30-Day SEC Yield of JPST is 0.43%.