One Small Change. One Big Return on Investment!
Have you taken a look at a recent statement from your brokerage firm?
If not, you should.
To see if this situation applies to you…
MICROSCOPIC INTEREST RATE ON SWEEP ACCOUNTS
Many brokerage firms use “sweep accounts” for holding cash.
These accounts literally sweep money in and out as you buy and sell investments within the account.
Have you checked the rate on your sweep account?
I did – at the time I checked into it, the rate was .20%.
AN 800% IMPROVEMENT IN INTEREST RECEIVED
After some further checking, I discovered that my brokerage also offered a “purchased money market fund”.
At the time, the rate on that fund was 1.6%
1.6% for idle funds or .2%?
I’m in for the 1.6% rate.
That’s an 800% improvement on the return.
Granted, I have to take an extra step to buy/sell this money market fund as needed, since it does not automatically sweep.
I’ll gladly take that step for the super-sized boost in investment returns!
What options do you have available to boost your return?
READ THE FINE PRINT OF COURSE
The details above relate to my brokerage account with Charles Schwab. I’ve been with them for a long time now, and they’ve done a great job for me.
It’s just the nature of the brokerage business for them to keep excess funds in the sweep account by default and not these purchased money market funds. They make money on the lower rates paid on the sweep accounts. They have to make it somehow, since they stopped charging commissions on many trades <grin!!>
As with any investment, please be sure to read the fine print relating to specific investment ideas and options within your own accounts. Your rates, returns, and products available may vary.
TRYING TO FIND EXCESS CASH?
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Let’s talk about your cash flow and related topics…