Parking Money With T-Bill And Chill.

In an earlier post, I covered why I am parking my current and future investment funds, many from dividends into T-Bills. Now, I plan to lightly go over my steps to wait out this stock market with my T-bill and chill strategy.

Parking All Money In T-bills?

No. For my tax-sheltered and tax-deferred retirement accounts, I control Fidelity and Vanguard; I will use their conventional Money market funds or ensure the cash sweep accounts pay well.

The real advantages are with regular brokerage accounts. My early retirement account with Charles Schwab will benefit most compared to their other cash options, like the low-paying Schwab Cash Sweep Account or moving the money into one of Schwab’s Money Market Mutual Funds.

If I thought I would jump back into the stock market right away, I would use the Money Market Mutual Fund option to keep my money within Schwab, which will make a decent rate of return.

Still, it will be a while before people’s buying habits catch up with reality.

I am taking the time to move money around and get into T-Bills.

December 2023 SCHD Dividend Distribution.

Before SCHD‘s December dividend distribution, I turned off dividend re-investment for SCHD on Schwab’s platform.

Now dividends, a few grand, will be paid but sit in the Schwab Cash Sweep Account till I move the cash elsewhere.

Move The Money To Treasury Direct

This is weird: for the first time, I moved money out of Charles Schwab a few months ago and got a phone call from the brokerage.

They stated that I had only made deposits for years, and it was my first withdrawal, so they wanted to talk to me and ensure it was what I wanted to do. No pressure; I was happy to have that extra layer of security.

So, to get money to Treasury Direct, I have to get the money to a bank account I have linked to Treasury Direct.

An easy step is to withdraw to a bank; I have both linked in my Charles Schwab account and my Treasury Direct Account.

Next, it’s time to build the T-Bill Ladder, sit back, and chill.

Building the T-Bill Ladder

I must determine my goals before deciding what type of ladder I want, time duration, staggered maturity dates, amount, etc.

With any investment, you need to have a goal established. Entry points are for buying stock, exit points are for profits and control losses, and in this case, we have to design an investment plan for these T-Bills.

As mentioned, I am going with a ladder approach, but let’s still look at my goals:

Maximize return on parked money.
Minimize loss of access to this money should the stock market start making some buying opportunities.

Based on these two criteria, go with a four-rung, 4-week t-bill ladder, splitting the money into four equal parts. With continued re-investments turned on.

FYI, I did consider doing an 8-week T-bill Ladder and splitting the money into eight equal parts. Still, it was extra work, and the 8-week T-bill return needs to be higher to justify it.

Benefits Of A Four-Week T-Bill Ladder

This type of ladder does not meet all my needs, but it’s an excellent compromise to meet my criteria.

When building the ladder, money is only pulled out each time a T-Bill is purchased. So, I kept cash in my account for the first couple of weeks.

After the last purchase, the 4th T-bill will mature; a week later, the first T-bill will mature and auto-purchase another one, repeating this process weekly.

I am maximizing my return on parked money. Remember T-Bills don’t really pay ‘interest‘ directly, they are Zero Coupon Bonds. Which can be a pain so created my How To Calculate A T-Bill Yield tool to figure interest returns.

What If A Stock Buying Opportunity Comes Up?

At the start of building the ladder, I buy a new 4-week T-bill weekly, so much of the money sits in cash until the last T-bill is purchased.

So, if the market changes early in the T-bill ladder creation, I can use the remaining cash to act on any rapid market shifts.

After the ladder is built and in full operation, if the stock market starts correcting, I can turn off the re-investment setting for the T-Bills, and each week, money will be returned to my bank account.

Since the bank account I use for T-Bills is the same as Charles Schwab’s, it will be easy to move money back into Schwab and start my purchases.

No rush and no sweat.

Why Is It T-Bill And Chill?

Well, I covered the t-bill portion, but the chill, well, I’ve watched my SCHD ETFs, the bulk of my non-retirement investments, fluctuate a lot. In the end, I’m getting little less than 4% dividend returns.

With the T-Bills, I should be averaging >5% returns. (Current T-Bill Rates: Treasury Direct)

There is no rush; I can wait for a stock market correction and let it take its time. This is the Chill part.

What Are You Doing Now That The Stock Market Is “Over-Priced”?

Buying High, Selling Higher?

Are you doing the T-Bill and Chill as well? Warren Buffett is moving further into cash. I’m curious if he’s been reading my blog. :p

I look forward to your comments, and will walk you through how I actually Schwab SCHD To 4 Week T-Bill Ladder, And Chill.

Tom, Growing His Passive Income Generators.