SGOV: Invest In Cash While It's Not Trash

seekingalpha02-21

Cash has reemerged as a valuable asset class, earning a healthy spread over inflation.Ultrashort bond and treasury ETFs, such as iShares 0-3 Month Treasury Bond ETF, have become popular as their ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2413644943?lang=en_US&edition=fundamental","thumbnail":"","is_english":true,"pubTime":"2024-02-21 19:27","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2413644943","market":"us","top_or_hot":-1,"title":"SGOV: Invest In Cash While It's Not Trash","media":"seekingalpha","content":"<div>\n<p>Cash has reemerged as a valuable asset class, earning a healthy spread over inflation.Ultrashort bond and treasury ETFs, such as iShares 0-3 Month Treasury Bond ETF, have become popular as their ...</p>\n\n<a href=\"https://seekingalpha.com/article/4671854-sgov-etf-price-stability-yield\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>SGOV: Invest In Cash While It's Not Trash</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nSGOV: Invest In Cash While It's Not Trash\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-02-21 19:27 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4671854-sgov-etf-price-stability-yield><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Cash has reemerged as a valuable asset class, earning a healthy spread over inflation.Ultrashort bond and treasury ETFs, such as iShares 0-3 Month Treasury Bond ETF, have become popular as their ...</p>\n\n<a href=\"https://seekingalpha.com/article/4671854-sgov-etf-price-stability-yield\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU1670628061.USD","symbol_name":"M&G (LUX) NORTH AMERICAN DIVIDEND \"A\" (USD) INC","start_time":0,"source_url":"https://seekingalpha.com/article/4671854-sgov-etf-price-stability-yield","article_id":"2413644943","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2413644943","pubTimestamp":1708514853,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Cash has reemerged as a valuable asset class, earning a healthy spread over inflation.Ultrashort bond and treasury ETFs, such as iShares 0-3 Month Treasury Bond ETF, have become popular as their divid","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU1670628061.USD":"M&G (LUX) NORTH AMERICAN DIVIDEND \"A\" (USD) INC","LU2430703251.USD":"WELLINGTON MULTI-ASSET HIGH INCOME \"AM4\" (USD) INC","LU2430703178.SGD":"WELLINGTON MULTI-ASSET HIGH INCOME \"AM4H\" (SGDHDG) INC","BK4135":"资产管理与托管银行","BK4581":"高盛持仓","FDN":"First Trust Dow Jones Internet I","LU2592432038.USD":"WELLINGTON MULTI-ASSET HIGH INCOME \"A\" (USD) ACC","BK4567":"ESG概念","LU1670627923.USD":"M&G (LUX) NORTH AMERICAN DIVIDEND \"A\" (USD) ACC","MINT":"PIMCO Enhanced Short Maturity Exchange-Traded Fund","LU2264538146.SGD":"Fullerton Lux Funds - Global Absolute Alpha A Acc SGD","BK4533":"AQR资本管理(全球第二大对冲基金)","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","LU2505996681.GBP":"WELLINGTON MULTI-ASSET HIGH INCOME \"AM4H\" (GBPHDG) INC","BK4535":"淡马锡持仓","SGOV":"iShares 0-3 Month Treasury Bond ETF","BLK":"贝莱德","LU2505996509.AUD":"WELLINGTON MULTI-ASSET HIGH INCOME \"AM4H\" (AUDHDG) INC","BK4588":"碎股","BK4550":"红杉资本持仓","LU1074936037.SGD":"JPMorgan Funds - US Value A (acc) SGD","LU1201861249.SGD":"Natixis Harris Associates US Equity PA SGD-H","VUSB":"Vanguard Ultra-Short Bond ETF","LU0980610538.SGD":"Natixis Harris Associates US Equity RA SGD-H","BK4504":"桥水持仓","LU2430703095.HKD":"WELLINGTON MULTI-ASSET HIGH INCOME \"AM4\" (HKD) INC","LU1988902786.USD":"FULLERTON LUX FUNDS GLOBAL ABSOLUTE ALPHA \"I\" (USD) ACC"},"translate_title":"SGOV：趁现金不是垃圾，投资现金","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"SGOV":1,"VUSB":1,"MINT":1,"BLK":1,"US30Y.BOND":0.9,"US2Y.BOND":0.9,"US12M.BOND":0.9,"US10Y.BOND":0.9,"FDN":0.9,"US3Y.BOND":0.9,"US5Y.BOND":0.9,"US6M.BOND":0.9,"US7Y.BOND":0.9,"US912797GB79.BOND":0.6,"US912796CX52.BOND":0.6,"US912796Z285.BOND":0.6,"US912797FH58.BOND":0.6,"US912797FS14.BOND":0.6,"US912797GK78.BOND":0.6,"US912797GL51.BOND":0.6,"US912797GN18.BOND":0.6,"US912797GP65.BOND":0.6,"US912797GQ49.BOND":0.6,"US912797GW17.BOND":0.6,"US912797GX99.BOND":0.6,"US912797HE00.BOND":0.6,"US912797HG57.BOND":0.6,"US912797HH31.BOND":0.6},"content_text":"Cash has reemerged as a valuable asset class, earning a healthy spread over inflation.Ultrashort bond and treasury ETFs, such as iShares 0-3 Month Treasury Bond ETF, have become popular as their dividend rates continue to rise.SGOV offers a balance of price stability and yield, making it a good option for earning interest while preserving principal.We dive in and discuss the ETF and risk factors for ultrashort funds.Trawick-Images/E+ via Getty Images During the low interest rate era, legendary investor Ray Dalio boldly proclaimed that \"cash is trash\". Zero interest rate policy combined with healthy inflation meant traditional savings accounts or treasuries of all maturities were losing instruments in terms of real return. The yield curve was flat enough that even long maturity treasury bonds were inadequate to hedge inflation while exposing any investor to a massive drawdown in the event rates would rise. To make matters worse, spiking inflation after the pandemic era meant negative spreads were digging even deeper. Data by YCharts The tune around cash changed with rising interest rates and tightening fiscal policy. The Federal Reserve raised rates to fight inflation, specifically in the labor sector. Rates climbed to current Fed funds target rate of 5.25% to 5.50%. Inflation has since tempered, and the Federal Funds rate remains at the highest level in 25 years. Data by YCharts The reversal means investors can earn a spread over inflation with treasuries or most interest-bearing instruments, including a money market or high yield savings account. For investors such as Dalio, this caused a reversal in sentiment. Towards the end of 2023, Dalio proclaimed that \"the facts have changed and I've changed my mind about cash as an asset: I no longer think cash is trash.\" The commentary makes sense, given treasuries of all duration now earn a positive spread over inflation. Stretched equity multiples and strength in tech feels reminiscent of several instances over the past five years. It leaves investors wondering if trimming their positions is appropriate. In the past, this meant selling stock and cashing out into an unproductive asset class which would lose against inflation. Alternatively, investors could take on credit risk by moving down the credit curve to earn the necessary yield. Rising rates changed the landscape and short-term investments now earn a real return. One current opportunity lies in ultrashort treasury funds, such as iShares® 0-3 Month Treasury Bond ETF (NYSEARCA:SGOV). Overview iShares 0-3 Month Treasury Bond ETF is an exchange-traded fund sponsored by BlackRock (BLK). SGOV invests in U.S. treasury securities with remaining maturities inside of three months. SGOV tracks the ICE 0-3 Month US Treasury Securities Index. Data by YCharts SGOV is somewhat comparable to a money market mutual fund; however, the most important differentiation is that SGOV is not dollar purchased. Traditional money market funds guarantee principal value at $1.00 per share, whereas SGOV has a floating share price. SGOV remains one of the most stable ETFs given the underlying assets are cash equivalents. Treasuries maturing within three months have little volatility as they are not exposed to duration or credit risk. As a result, SGOV's net asset value remains stable, affected primarily by the monthly dividend. The choppiness in SGOV's share price is due to the monthly distribution of interest. As the fund begins trading ex-dividend during the month, the share price is reduced accordingly. SGOV is less volatile than other ultrashort bond funds. SGOV's short duration treasury portfolio has been more stable than competing funds from PIMCO (MINT) and Vanguard (VUSB). SGOV is one of few ETFs offering a treasury-specific portfolio. Data by YCharts Despite being considerably more stable, SGOV also produces a yield which is comparable to options that take more risk, mostly due to expense efficiencies. SGOV's monthly dividend continues to rise as the assets are reinvested into higher yielding treasuries. SGOV's latest monthly dividend was $0.4581, corresponding to a forward yield of 5.5%. Data by YCharts SGOV is less expensive than competing funds, charging an expense ratio of just 0.07%. The expenses are lower than even competing money market funds, such as the Vanguard Federal Money Market Funds which charges 0.11%. As another point of comparison, MINT charges 0.35%. While most ultrashort bond or treasury ETFs charge modest expense ratios, the impact to performance can be significant, given the low growth/volatility of the investment. Risk Factors Treasury and ultrashort bond exchange-traded funds carry unique risk factors. Funds such as SGOV are generally considered a cash substitute whereby investors can earn meaningful interest while preserving principal. There's validity given the portfolio is comprised of 100% treasury securities maturing within a few months. Illiquidity becomes a risk factor for any ETF. Large market corrections or news with heavy impact can cause massive unidirectional market action. For ETFs and other funds this can result in illiquidity or wide spreads against net asset value. For a cash equivalent, the spread can break through the veil of principal protection. In contrast, traditional money market funds avoid this risk by maintaining their dollar purchase structure. Traditional money markets are not invulnerable and there have been isolated examples of \"breaking the buck.\" However, the track record for well-established money market funds is excellent. Interest rate risk is also present with SGOV. The Federal Reserve has indicated that rates are likely to decline at some point in 2024. For bond investors, this is a tailwind as falling yields will correspond to rising bond prices. For SGOV, this will mean the evaporation of interest income as the fund reinvests at lower interest rates. Also, SGOV is unlikely to benefit from the capital appreciation that longer duration bond funds may experience. This risk factor comes at the price of stability as SGOV is designed to remain as close to $100 per share as reasonably possible. Conclusion Cash has reemerged as a valuable asset class, now earning a spread over inflation. Ultrashort bond and treasury ETFs have quickly gained favor as their dividend rates continue to quickly climb. SGOV currently yields above long-term inflation rates meaning investors can protect principal while earning a risk-free real return for the first time in decades. Data by YCharts  SGOV is one of the best options for a balance of price stability and yield. As the Federal Reserve waives off the possibility of rate cuts in the early part of the year, parking an allocation of patient capital in a fund like SGOV means earning interest while keeping principal stable.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2413644943"}