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After recently selling 157 Toronto-Dominion Bank (TD) shares, I now have $10,000 in cash in my Self-Directed IRA account. So, what's next?
The Problem
I don't see any screaming stock buys, and the Schwab default money market fund for cash only pays a minuscule 0.45% APY. That's barely better than stuffing it under my mattress!
I need to do something more intelligent with this cash, but what?
Enter SWVXX
A newsletter reader suggested SWVXX, the ticker symbol for the Schwab Value Advantage Money Fund.
It's a money market fund that aims to keep its price steady at $1 per share. Think of it as a slightly fancier piggy bank.
SWVXX on Simplysafedividends.com
Why SWVXX Caught My Eye
Three things grabbed my attention about SWVXX. First, it offers a higher interest rate than my current money market fund. Every little bit helps, right?
Second, I can quickly access my cash if I spot an investment opportunity.
Third, it feels safer than dumping everything into stocks when everything seems pricey.
The Potential Downsides
There are a few things to watch out for with SWVXX.
The biggest worry is inflation. If prices start climbing faster than the interest I'm earning, my money might not stretch as far in the future.
If I leave my cash parked here too long, I could miss out on higher returns elsewhere.
While SWVXX tries hard to stay at $1 per share, it's not guaranteed.
There's also a tiny (and I mean tiny) chance I could lose some money.
The Bottom Line
After weighing the pros and cons, SWVXX is a decent temporary parking spot for my TD cash.
So, as of this writing, I moved $4,000 into SWVXX and should receive a distribution of $17.48, an annualized yield of 5.24%.
Remember, the yield will also fall when interest rate cuts start, so this really is a pit stop.
SWVXX at SimplySafeDividends.com
It won't make me rich overnight, but it should earn more interest while I figure out my next move.
Plus, I can sleep a little easier knowing my money isn't just collecting dust.
Remember
Whether you're dealing with $100 or $10,000 like me, it's important to think about what you want your money to do for you in the long run.
SWVXX might be a good pit stop, but it is probably not where you want to park your cash forever.
Your Turn
Have you used SWVXX or similar money market funds? How do you handle unexpected cash windfalls? Hit REPLY and let me know your thoughts!
😁THANK YOU to everyone who responded to the last newsletter!!
🤑Rick Stambaugh from Orange Mountain Financial brings you ‘Grow Retirement Income.' He’s a seasoned pro with over 30 years in trading and a passion for guiding folks to a prosperous retirement.
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