Friday, April 18, 2008

Siebert and Fidelity are tops for yield on cash in accounts

Kiplinger has a nice review of the value you get with cash in various (online) brokerage accounts in an article entitled "Best Online-Broker Deals for Fund Investors." The article is mostly about mutual funds, but "Investing your cash" was one of their criteria. Siebert and Fidelity are their top picks. As the article notes:

Investing your cash. The better brokers -- Siebert among them -- automatically sweep your cash into a decent-yielding money-market fund. Fidelity gets a middling score because it requires investors to opt for a money-market fund; otherwise, cash goes into an interest-bearing account. We gave the least credit to firms that don't offer a money-market fund at all (Scottrade) or that impose restrictions (Schwab and Wells Fargo).

I use Fidelity as my preferred brokerage account, but I still have a Siebert account and always appreciated the decent rate for uninvested cash. In fact, I was always annoyed that Fidelity had options that were less attractive than Siebert, even though Siebert uses a Fidelity fund. I opted to use Fidelity Municipal Money Market (FTEXX), for my Fidelity account which has a so-so yield but it is tax-free, making it fairly decent. And then I occasionally move cash to Fidelity Money Market (SPRXX) or Fidelity Cash Reserves (FDRXX) for better yields. Siebert has only Fidelity Prime Fund Capital Reserves (FPRXX) for "core cash", which doesn't yield as much as FDRXX or SPRXX, but does yield better than any of the options that Fidelity offers me for "core cash." Siebert does use FDRXX for "core cash" in retirement accounts.

Note: The failure of the full-service brokers to offer a decent yeild on "core cash" was, in my opinion, the single biggest factor encouraging gullible investors to go along with their full-service broker's "suggestion" that they put their money in auction-rate securites (ARS).

-- Jack Krupansky

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