Where To Put Cash in a Brokerage Account With Little Risk (SHY,SHV)

If you hold cash in a brokerage account right now you are most likely being paid around 0.1% interest from your cash sweep vehicle. Usually this is a money market account with most brokerage houses.

If one is weary about committing all their capital into equities or bonds, desires earning more than negligible interest, want something that is VERY low risk, and something that can be converted to cash instantly, there are few alternatives.

Two possible ETFs one could buy to meet this need are Ishares Short Term Treasury ETF (NYSE: SHV) and Ishares 1-3 Year Treasury Bond (NYSE: SHY). It should be noted principal is not protected in either of these funds, but they are very stable low risk ETFs.

SHY currently has a net yield of 1.4%, while SHV has a net yield of 0.2%. SHY is somewhat more volatile than SHV. Over the past 2 years SHY is up 3.75% (not counting interest payments) and SHV is up 0.5% (also not counting interest payments).

SHY has a tendency to move in the opposite direction of stocks, while SHV is very stable.