How to earn 4.7%* on your cash

Earn 4.7%* on your cash — and no, it's not too good to be true. Plenty's cash mgmt product isn't a savings account; it's a managed portfolio of money market funds. The same money market funds where billionaires and hedge funds park their cash; your investment is in good company - they're held with ~$20B in assets and usually requires a minimum $500M investment. We're now giving you access through Plenty with a $100 investment minimum. All of this is part of our commitment to make it possible for you to invest like the 1%.

Inflation rates are at their highest level in 15 years. Quick refresher: inflation is when prices of things rise over time — like how a quick domestic flight that was once $250 is now closer to $400. When it comes to your money, the simple truth is that inflation means your cash buys less now than it did before.

With a volatile stock market, is there a safe place to save your money while still earning a high interest rate? A savings account isn't your only option. We've found a very low risk way to not only preserve, but grow your hard-earned cash (and no, you don’t need to be a wealthy client or hedge fund with millions of dollars). With access to a cash mgmt portfolio that currently offers a higher yield, you can save like the 1% do.

TL;DR: Money market funds

1. Are a low-risk, high-return place to park your cash

2. Are portfolios of cash and government-backed investments (like bonds or t-bills)

3. Earn higher interest on your savings to offset the effects of inflation

4. You can sell anytime the market is open

What is a money market fund (aka mmf)?

A money market fund is a type of portfolio that holds cash or government-backed securities. For the wealthy, it’s what they often use like a savings account. It's also what Wall Street's hedge funds and pension funds use when they need a safe place to park and grow their cash. Money market funds are considered extremely low risk on the investment spectrum, and they have their pros and cons, just like anything else. Here are a few things to keep in mind:

Are mmfs good when interest rates drop?

Yes!

Money market funds set a management fee upfront and if the rate moves up or down, the fee doesn't change month to month. Plenty's cash+ goal charges a 0.2% annual investment fee to be transparent about what we make. When the federal funds rate goes up, we make 0.2%. When the rate goes down, we make 0.2%.

Banks operate entirely differently: when you deposit money in a bank, the bank pays you an interest APY. Let's say you deposit $1,000 and the bank pays you 2%. The bank then takes your $1,000 and lends it out to someone applying for a car loan - they charge this other individual 10%. Now the bank makes 8% in profit. If the bank pays you less… say 0.59%APY aka the national savings account average as of Aug 29th… then the bank will earn even more.

The federal funds rate comes into effect when

There's an incentive for the bank to offer the lowest interest rate that they think you'll accept, because that's directly the profit they make.

Current predictions are for the federal funds rate to decrease by 0.25-0.5%. Taking Credit Karma as an example, they recently announced that they were decreasing their savings account APY by 1% (down from 5.10% APY to 4.10% APY). Despite predictions of a smaller decrease, they've gone ahead to proactively lower interest which will directly increase the profit they make off everyday consumer deposits.

The Wall Street Journal wrote that everyday consumers have missed out on over $600 billion of interest payments because they've left savings in low-yield checking or savings accounts at big banks, instead of places that earn rates closer to the federal funds rate.

So if you're looking for a low hanging fruit way to make more on the money you already have, MMFs can help take your savings further.

The Pros of MMFs:

They’re a high-yield way to grow your savings: at Plenty, you can earn 4.7% on your cash with access to a portfolio of money market fund (normally for wealthy clients, hedge funds, and big banks with $500M minimums).

You can withdraw anytime: unlike mutual funds or CDs, money market funds are highly liquid, so your funds can be withdrawn anytime with no lock-ups or penalties (withdrawals can take 2-4 business days).

They’re managed for you: when you invest in a money market fund, your money is combined with other investors' money to hire experienced people to manage the fund. 

They’re SIPC insured up to $500k per account: money market funds are required by law to invest in assets that pose minimal credit risk. Since they have to follow strict rules and regulations, you can feel confident your investment is protected. The Securities Investor Protection Corporation (SIPC) is the investing/brokerage version of FDIC insurance (which is for checking/savings accounts).

The Cons of MMFs: 

Withdrawing takes a few days; we'll sell your investment then transfer you the cash.

There are some fees: 4.7%* is after all fees (it's what you'll earn). Plenty's fee is 0.2% (we want to be upfront about that, we don't believe in hidden fees).

So, if you’re looking for a great way to save and invest while earning a high interest rate, you may want to consider putting your money to work for you in a money market fund.

About Plenty

Plenty is an investment platform designed specifically for couples to build wealth, together. We go beyond budgeting, making it simple to invest, save and grow towards your future goals by unlocking access to the financial strategies of the wealthy. Ready to get started? Sign up for your 1 month free trial today.

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*Plenty's cash management product invests 99.5%+ of the portfolio in US-government backed securities as of October 1, 2024. Although the strategy seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. You could lose money by investing in the strategy. Plenty's cash management product is SIPC insured. An investment in the strategy is not a bank account and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The rate quoted is subject to change and will decrease or increase based on changes in market conditions, interest rates, among other factors. The rate quoted is net of transaction and advisory fees.

The information provided herein is for general informational purposes only and should not be considered individualized recommendations or personalized investment advice. The type of strategies mentioned may not be suitable for everyone. Each investor should evaluate an investment strategy based on their unique circumstances before making any investment decisions.

Investing involves risk, including risk of loss. Past performance may not be indicative of future results. Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets. Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

Tax-loss harvesting involves certain risks, including, among others, the risk that the new investment could have higher costs than the original investment and could introduce portfolio tracking error into your accounts. There may also be unintended tax implications. We recommend that you consult a tax professional before taking action.

Plenty does not provide legal or tax advice. Where specific advice is necessary or appropriate, individuals should contact their own professional tax and investment advisors or other professionals (CPA, Financial Planner, Investment Manager) to help answer questions about specific situations or needs prior to taking any action based upon this information.

All expressions of opinion are subject to change without notice in reaction to shifting market, economic, and geo-political conditions