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What can bond ETFs do for you?

Put your cash to work

A money market fund or deposit account will protect the nominal value of your cash, but you may be missing out on a chance to keep up with inflation and grow it with interest from bonds.1

Seek a return from your cash with bonds ETFs

U.S. investors have about 58% of their investable assets sitting in cash or cash equivalents, based on our investor survey. That means that the purchasing power of your cash stash can diminish as inflation eats away at it over time.

Today, most bank accounts offer a minimal amount of interest. Even bank certificate of deposits (CDs) and money market funds don’t currently provide enough yield to keep up with inflation.

Short duration bond ETFs can potentially add more income while helping you step out of cash and meet short- or long-term investment goals.

Average yield for cash equivalents and
short duration bond ETFs

Average yield for cash equivalents and short duration bond ETFs

Source: FDIC, Bloomberg, BlackRock, as of 6/30/18. Savings Account, 1 Month Bank CD, and Money Market Funds are the national average. ETF yields are 30-Day SEC yields. The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.iShares.com or www.blackrock.com. For standardized performance, please click here.

It’s important to note that short duration bond ETFs typically carry a higher degree of risk than money market funds and should not always be used as substitutes.

Ways to invest excess cash

There’s no one-size fits all solution. For many, it helps to think of your cash in layers, and segment it based on how soon you will need to use it. Try segmenting your cash into short, medium and longer-term needs.

For instance, a segment can be cash that you need as soon as 0-3 months, 3-6 months, in the next 6-18 months, or 18 months and beyond. As a general rule, the sooner you will need to use each segment of your cash, the less risk you may want to take on with an investment.

Cash that will go unused immediately may be able to earn more interest for you now. The table below outlines a hypothetical cash segmentation framework.

Cash Segmentation Strategy Sample

Time HorizonImmediate-term
(0-3 months)
Short-term
(3-6 months)
Medium-term
(6-18 months)
Longer-term
(18+ months)
Typical Use Immediate day to day expenses Short-term expenses and emergency funds Larger future purchases or unexpected expenses Longer-term savings
Cash Objective Capital preservation and daily access Stability with incremental income Incremental income with low risk Generate income or growth with some risk
Investment Type Cash and cash equivalents Ultra-short duration bonds and cash equivalents Ultra-short duration bonds Short duration bonds
Potential Solution Money market funds ICSH FLOT, NEAR IGSB

For illustrative purposes only.

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