Cash is no longer king. Here are 3 alternatives investors are trading it for, according to chief money managers.

• Investors look diminishing returns from rate alternatives arsenic liking rates decline.
• Money marketplace costs offered low-risk yields, but missed gains successful nan S&P 500.
• Treasuries, gold, and bitcoin look arsenic alternatives amid dollar concerns and ostentation pressures.

Just a twelvemonth ago, if nan banal marketplace sewage bumpy aliases felt risky, investors could shave a spot disconnected their positions and parkland successful cash-like money marketplace funds yielding somewhat complete 5%.

Today, rate alternatives are yielding somewhat less. Still, they stay adjacent aliases supra 4.5%, which is simply a tempting return successful speech for nary risk. But arsenic we caput deeper into an interest-rate-cutting cycle, nan benefits of sitting connected nan sidelines will diminish, and investors will request to rethink their strategy.

While nan perk of a low-risk plus pinch a decent output seems for illustration a saccharine deal, it really did immoderate investors a disservice, says Mark Malek, nan CIO astatine Siebert. Specifically, those who didn't person liquidity needs but chose to beryllium successful rate anyhow missed retired connected a beardown twelvemonth for nan S&P 500.

"I'm going to opportunity thing controversial, which is that we weren't having arsenic galore of these conversations erstwhile money markets were almost zero," Malek said. "Clients had nary different alternatives, truthful they were putting their money to activity successful nan equity markets aliases successful nan champion bonds they could find. Many group should person astir apt invested successful equities and would've astir apt gotten awesome returns."

The main advantage money markets springiness investors is speedy entree to their cash, followed by little consequence and past a decent yield. The erstwhile is harder to match. But nan second 2 tin beryllium recovered successful Treasuries, notes, and bonds, Malek said. By sticking to shorter-term Treasuries, investors tin still meet their liquidity needs.

"That's wherever nan full speech changes because now you're saying, 'OK, we tin get you into a three-month bill, but past you would want to clasp that,'" Malek said, adding that he would ne'er counsel a customer who needs liquidity to spell further retired and bargain a two-year note. And anyway, nan output curve is inverted, meaning there's nary word premium, pinch nan champion yields coming from nan one-month retired to nan six-month Treasury.

It's astir gauging liquidity needs and past sticking to bills aliases looking for older notes that are months distant from maturity, Malek said. The main situation pinch going shorter word is nan rollover risk, which happens erstwhile you're faced pinch little favorable yields erstwhile nan existent Treasury matures. For investors who don't person contiguous rate needs, Malek advises a six-month measure astatine a 4.5% output since he expects rates to beryllium 75 ground points little by then. If liquidity needs arise, investors whitethorn beryllium capable to waste for a profit if nan Fed's cutting rhythm is steeper than expected, he added.

Investors pinch a spot much of a consequence appetite who want to support a output conscionable complete 5% should see investment-grade firm bonds, which are AAA to BB-rated, Malek said.

Dollar alternatives

While interest-rate cuts are portion of nan move distant from cash, location are different factors that make nan dollar, successful general, a crummy spot to beryllium correct now, says David Miller, nan CIO astatine Catalyst Funds.

Inflation remains coming moreover if it's not arsenic precocious arsenic it was. The Federal shortage continues to balloon. And, nan weaponization of nan dollar against countries for illustration Russia has made it little charismatic globally, Miller noted.

Based connected these further concerns, Miller says nan closest replacement would past beryllium gold, and large money is vying for it. Central slope request for golden reached its highest successful a decade successful 2022 and 2023. Although it slowed successful 2024, it was still up by 6% from a twelvemonth agone successful nan 2nd quarter, according to nan World Gold Council.

Investors whitethorn consciousness queasy astir nan plus arsenic it hits highest prices adjacent $2,800 per ounce. But you person to see nan worth of nan dollar against that backdrop, Miller noted. Simply put, nan M2 money supply, which includes rate and rate alternatives, has skyrocketed since 2020 by complete 36%, debasing nan dollar.

For investors looking for that golden alternative, Millers says they tin buy coins, bars, and moreover golden ETFs.

Bitcoin is different replacement that much risk-prone investors look to. As of Tuesday, it surpassed $71,000, hitting adjacent its all-time highs arsenic hedging request grows. While it has akin liquidity to cash, it's overmuch much speculative, Miller noted.