Back to School: Every Little Bit Counts

School's back in session, so it's time to take a look at your finances.

School’s back in session, so it’s time to take a look at your finances.

In school you learned how to get the highest score on a test: first answer all the questions you know, then go for partial credit on the harder ones. Your family’s portfolio can work the same way, first focusing on the decisions that will have the biggest impact and then searching for ways to enhance your returns on the margin. Here are three ways to streamline your finances so that your money works harder for you.


– Choose ETFs

Picking individual stocks is tough; even the pros often can’t select winners. Statistically, investors who try to bet on individual companies rarely beat the market. But many people keep trying to pick individual stocks because they’ve read the fairy tales about others who have built fortunes on one stock. Unfortunately, unless you invest in a company early on and it becomes a stock-market juggernaut, you are unlikely to amass a huge profit from just one holding.

The more conservative way to invest in equities is to buy low-cost, broad-market ETFs and to hold on to them for many years, dollar cost averaging into your position over time. That way, you diversify your risk among a large number of stocks without trying to time the market, while keeping your costs low.


– Avoid high fees

Why do fees matter? This is one of the areas where investors have a chance to make a real difference in their results, regardless of how the market performs. Every dollar you spend today paying fees – on your funds, your bank accounts, or your investment adviser’s services – is a dollar that won’t compound in your portfolio over time. The power of compounding is what makes a portfolio grow in a steady, reliable way for most investors. Fees aren’t inherently bad — what matters is the performance of your investments net of fees.  If you have a stock fund or a financial advisor that consistently outperforms the market, it may be worth the extra fees.  The problem is that with equities, it’s difficult to find someone who can consistently outperform the market by a wide margin year in, year out.  If you’re paying 1.0 – 1.5% in fees each year, that can put a real drag on your returns over time.


– Earn more on your cash

There will always be some portion of your portfolio that you choose to keep in cash, typically held in your bank account or in money market funds. If that cash on the sidelines isn’t earning as much interest as it could, you’re leaving money on the table. Just like with high fees, earning little interest on your money in the bank puts a drag on your portfolio — money that could otherwise be compounding over time. offers an investor-friendly system that helps you consistently earn more on your cash by helping take advantage of the higher yields offered by online banks.  Today, these yields are as high as 0.95%, considerably higher than the national savings account average of 0.11% or most money market funds that yield a paltry 0.01%.  By monitoring for changes in interest rates, and automatically helping your money move to the leading FDIC-insured banks offering the highest rates each month, MaxMyInterest can help you earn higher yields on your cash, boosting the returns on this portion of your potfolio.

Is Warren Buffett Predicting a Market Peak?

For disciples of billionaire investing guru Warren Buffett, now might be a very good time to hold cash. With Berkshire Hathaway stock hitting a 52-week high, handsomely outperforming the S&P 500 over the past two years, it’s pretty clear that being “greedy when others are fearful, and fearful when others are greedy” is a winning strategy.

With help from our friends at investormill, we took a look at the correlation between Berkshire Hathaway’s cash position and the broader U.S. stock market, using the S&P 500 as a proxy.

Berkshire S&P Chart

Buffett is among the most disciplined investors, happy to sit on the sidelines for several years if need be until he sees value. Looking at Berkshire Hathaway’s cash position – a staggering $55 billion – it’s evident that he remains as disciplined as ever, building up cash just as others are so eager to spend theirs amidst an ever-frothier market. When the market dips, he can be expected to deploy this cash, taking advantage of “time arbitrage” – the ability of investors with longer time horizons to reap outsized gains. Family offices and private equity funds (and their investors) are other beneficiaries of this model of investing.

What does this mean for individual investors?

With U.S. households sitting 40% in cash (even high net worth households are holding an astounding 31% cash), some would argue that the equity market has a lot longer to run. But many investors still recall the pain of the financial crisis, and savvy investors profited handsomely by having dry powder on the sidelines, so that they could plow money into equities at precisely the time that everyone else was selling anything that wasn’t nailed down. Those brave enough to buy into the S&P 500 at its low of 676 in March of 2009 have nearly tripled their money by this point.

As I mentioned recently during an interview with Christine Benz at Morningstar, many investors are holding a disproportionate allocation of cash because fixed income seemingly has nowhere to go but down given the expectation that interest rates will rise. Yet they don’t want to deploy the proceeds into equities or other asset classes, so the funds sit in cash by default. In this environment, it becomes all the more important that this large cash allocation earn as much as it can without risk of loss of principal.

FDIC-insured online bank accounts seem like a smart place to store this cash. We developed MaxMyInterest to help investors earn as much as possible on cash by helping spread it out across some of the leading names in online banking. Max members are earning a weighted average of 0.88% today, far more than most bank accounts, money market funds, or even CDs. Their cash remains liquid, held in their own names, at their own accounts at leading FDIC-insured banks. Yet when interest rates change, their cash automatically migrates to the banks offering the best rates, so that they can continue to maximize their yield while remaining liquid, ready for the next market opportunity.

New Money Market Fund Rules: How will they affect investors?

S.E.C. Approves Rules on Money Market Funds

S.E.C. Approves Rules on Money Market Funds

When investors think about their portfolios, they often picture several buckets: stocks, bonds, real estate, alternatives, commodities and cash. This “cash” portion includes traditional bank deposits, but also many other instruments deemed “cash equivalents,” including short term CDs and investments in money market funds.

Until now, it has been generally reasonable to assume that money market funds are as good as cash. While they’re not covered by FDIC insurance, these funds tend to be liquid and their NAV, or net asset value per share, has been pegged at $1. However, yesterday’s new money market fund rules approved by the Securities and Exchange Commission bring into stark relief why money market funds are not “the same as cash.”

The SEC announced on July 23 new regulations governing how investors can get their money out of money market funds in the event of financial-markets turmoil. The rules allow some funds to put up barriers to redemptions under certain circumstances, according to The New York Times. That means investors could potentially lose access to their cash when they need it most.

What this means, in practice, is that investors should treat money market funds differently from cash as they think about liquidity. Before these new rules, investors could typically redeem their money-market fund shares at the end of each day. But if — in the event of market turmoil — it’s not possible to access these funds right away, that money is suddenly less available to the investor, and thus less valuable. It’s often precisely when markets are most troubled that cash becomes most valuable. Ask any investor who had excess cash lying around and bought the S&P 500 index when it fell below 700; today, the S&P 500 index stands just shy of 2000.

There are plenty of situations where an investor might choose to lock up money to get a more favorable return. CDs usually promise higher rates for a longer period. Private equity investments require much longer lock-ups, typically up to 12 years.

Money market funds are a different case. At current interest rates, these investments offer little to no return. Faced with these new regulations, investors may wonder why they must bear the risk of losing liquidity without being compensated by additional interest.

How to get around this problem? For investors who are looking to keep their money liquid, available, and FDIC-insured, savings accounts at leading online banks are a smart choice. These savings accounts can pay up to 0.90%, above the 0.11% average that U.S. savings accounts as a whole pay in interest and far more than the 0.01% offered by many money market funds at present.

For those investors compelled by the opportunity to earn higher returns on FDIC-insured bank deposits, MaxMyInterest offers a convenient platform to automatically manage multiple savings accounts to achieve greater FDIC protection and maximize interest income.

How can U.S. depositors protect their cash against earning negative interest?

Protect your cash against earning negative interest.

Protect your cash against earning negative interest.

The European Central Bank’s announcement that it will lower interest rates in the Eurozone and charge banks to park their funds in Frankfurt overnight brings renewed attention to the problem of bank depositors earning little interest on their savings accounts.

The ECB’s move is designed to spur banks to lend out more in the form of loans to European companies and individuals. By cutting its deposit rate to negative 0.1%, the central bank aims to boost economic growth in the region, which has struggled to overcome a sovereign-debt crisis that followed the global financial crisis and sparked a deep recession.

As the world emerges from the financial troubles of the last half-decade, central banks are signalling that low interest rates will continue. The U.S. Federal Reserve is ending its own quantitative-easing program, which pumped extra money into the economy, but rates are only expected to rise slowly for the next few years, unless inflation spikes sharply.

While more bank loans could have a positive effect on European businesses and encourage companies in the region to invest more, this is not good news for bank depositors. They are already suffering from ultra-low interest rates on savings accounts. Many people are fundamentally uncomfortable with the idea of having to pay to keep their money in the bank. With today’s near-zero interest rates on offer from most banks, the real return on cash is often negative, even in the U.S.

Fortunately, depositors have options. In the U.S., online banks have lower operating costs than traditional brick-and-mortar banks and are thus able to pay higher interest rates to their depositors.

With Max (, we have built an automated system that helps depositors benefit from the higher rates on offer from FDIC-insured online banks. Today, our members are earning a weighted average 0.87% on their cash, or 0.79% net of fees, which compares favorably to most bank accounts or money market funds that offer little to no yield.

The effects of compounding are important to an investor’s portfolio. Earning an extra 0.70% to 0.80% on deposits, year after year, can have a profound impact. Most Max members can expect to earn tens or hundreds of thousands of dollars in incremental interest over their investment horizons, simply by using Max to help continuously optimize their cash allocation across multiple online bank accounts.

Periodically reviewing one’s portfolio and ensuring that cash is working as hard as possible — while spread across enough banks to be adequately covered by FDIC insurance — is one way to enhance returns without taking on more risk. Many depositors, however, are too busy to focus on how they manage their cash. In a time of low interest rates, it’s crucial to keep on top of which online banks are offering the best rates and move deposits accordingly — or let Max handle it for you, automatically.

Gary Zimmerman is the Founder of

4 Ways to Keep Your Cash Safe

Watch your cash grow with Max

Sitting on a lot of cash?  Make sure it’s fully insured.

Banks are the safest place to keep your money — until they’re not. It’s a remote risk, but bank failures do occasionally happen.  It’s important to ensure your cash is adequately protected, before it’s too late.

That’s why deposit insurance exists. In the U.S., the government’s FDIC insurance program guarantees the first $250,000 of a depositor’s cash in each insured bank. But many depositors hold much more than the FDIC limit in cash, leaving a portion of their cash at risk in the unlikely event of a bank failure. Investors keep a portion of their financial assets in cash precisely because they don’t want to take risk, so it makes sense to ensure that as much of your cash as possible is protected by FDIC insurance.

Here are 4 ways to keep your cash safe:

1. Open multiple account types

FDIC insurance tops out at $250,000 per depositor, per account type, and per bank. If you set up an account for yourself, one for your spouse, and one held as a joint account in both of your names, together you now have $1 million in FDIC coverage at that bank: $250,000 for each of your individual accounts, plus another $250,000 for each of you for the joint account.

2. Ask if your bank has multiple bank charters

The largest national banks often have more than one bank charter. This means they can offer their account holders the ability to have accounts at what’s technically more than one bank. Because FDIC coverage applies per bank, this can increase the deposit insurance that account holders can receive. If you hold $750,000 at a bank that has three bank charters, you may be insured under FDIC rules for the entire balance. Ask your bank if this applies to your accounts and read the fine print to ensure you are adequately protected.

3. Open accounts at different banks

To make sure your cash in the bank is insured, you can open accounts at a variety of banks. That way, even if one bank fails, you’ll still have access to your accounts at the other banks.  Be sure to keep your accounts below the $250,000 FDIC coverage limit at each bank.

As you spread your accounts among different banks, consider online banks as well as traditional brick-and-mortar banks. Savings accounts at online banks often pay considerably more in interest, because they don’t have to support the same level of expenses for branches or tellers. Just be sure to monitor the rates your banks are paying, so you can make certain you’re getting the most interest you can. Banks change their rates frequently.

4. Use to manage accounts held at multiple banks to keep you within the FDIC limits while earning more in interest

If you’d like a solution to help you manage your existing brick-and-mortar checking account along with online savings accounts, while optimizing the amount of interest you earn, try our service, called Max, at Max uses the links between your brick-and-mortar checking account and your online savings accounts to optimize the amount you earn in interest on your cash in the bank, while respecting FDIC limits. That means that your money automatically moves between your own accounts to stay within the FDIC limits at each bank, while helping you earn as much interest as possible, even as rates change.

As an alternative to bank accounts, many investors choose to keep cash in money market funds.  This is especially prevalent within brokerage accounts.  However, shares of these funds aren’t insured, which means they could potentially lose value. During the global financial crisis, one such fund, the Reserve Primary Fund, dipped below $1 per share in value, sparking an exodus from this class of investments. Since then, Americans’ investments in money market funds have fallen from $4 trillion to $2.7 trillion today.

One downside of money market funds: many of these funds currently yield as little as 0.01% annually. By contrast, bank accounts typically pay 10 times that much in interest and online savings accounts managed through the system are yielding approximately 80 times more, even after taking fees into account.  Max members are currently earning a weighted average of 0.87%, or 0.79% net of fees, all via FDIC-insured savings accounts at leading online banks including American Express, Barclays, GE Capital, Ally Bank and Capital One 360.

Gary Zimmerman is the Founder of