Author Topic: AAA  (Read 2073 times)

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Offline Annabella

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AAA
« on: 20/01/2018, 01:00:06 PM »
HI Guys
With the latest sell signals in ETF Stocks I have cash in hand - since I use SelfWealth broker to trade that cash will not now earn any interest.  So my question is regarding the ETF AAA as an alternative for my cash.  I'm wondering how long one has to hold the AAA ETF in order to make the purchase worthwhile - ie since one can't predict when the next buy signal will pop up for another ETF - the purchase of AAA could be for just a day or so or could be for months.  If the AAA is held for only a day or so - does one receive any interest/ enough interest to out weigh the $19 brokerage? Cheers Annabella

Offline Don McKinnon

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Re: AAA
« Reply #1 on: 20/01/2018, 02:48:57 PM »
Hi Annabella,

The answer as in many things in life is:- It depends!  AAA, over a period which isn't very short, gives quite a reasonable interest return compared to other cash management options, but not all.  Whether or not a particular AAA trade gives a good return, or not, depends on the buy price, the sell price and on any dividend received during the trade - just like every other stockmarket trade.  AAA pays a dividend every month and its price falls immediately after a dividend date and then rises slowly to approximately reflect the value of the accrued interest.  This pattern is very obvious if you look at AAA on Beyond Charts.

So, given that you're dealing with a traded entity whose price oscillates slightly day to day, it is certainly quite possible to lose money on a very short term, low value trade (including both the gross trade outcome and brokerage) or to have a poor return compared to other cash management investment alternatives.  However, for larger trades and for longer periods, you should always get a good return.  There is a risk trade-off here but the potential losses are very low.

One of the greatest values of the option to use AAA to hold cash is that your cash is always just a simple trade away from being available to make a buy on a new SPA3 entry signal.  If you put the money somewhere else, you then need to transfer it back to Self Wealth before you can buy.  It is quite easy to lose a day or more out of the market if you haven't predicted the signal happening.

I trade SPA3 ETF and I have adopted the trading rule that as soon as a position is sold, I immediately use the cash to buy AAA shares, unless there is a good likelihood of new signals in the next day or so.  If there is, I just wait to see how that plays out and buy into AAA later if that likelihood goes away. 

Please note that all the comments above are based on using a low cost, fixed price broker like Self Wealth.  For someone that uses a higher cost broker or one with a percentage commission, the relative attractiveness of AAA is quite different.  The time period to break-even on the trade would be longer.

Regards
Don
« Last Edit: 20/01/2018, 02:56:22 PM by Don McKinnon »

Offline Annabella

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Re: AAA
« Reply #2 on: 22/01/2018, 11:47:41 AM »
Thanks for the reply Don - I use Selfwealth so brokerage is not too costly.  I think I will adopt a similar trading rule as yourself because as you say transferring money in & out can loose a couple of days in the market.
Regards
Annabella

Offline Paul

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Re: AAA
« Reply #3 on: 11/02/2018, 05:17:13 PM »
Hi, does anyone know of any stocks on the Nasdaq which are the same or simliar as AAA.  I am going on holidays soon and will want to put my money to work for the 6 weeks I am away.

Thanks

Offline Johnathan Habersberger

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Re: AAA
« Reply #4 on: 12/02/2018, 11:02:25 PM »
Paul, I use NEAR the iShares short maturity fund which is not NAS but is US based so may be fine,

Cheers,

Jonathon

Offline Gary Stone

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Re: AAA
« Reply #5 on: 13/02/2018, 11:10:03 AM »
Paul,

These other 3, in addition to NEAR, that can also be considered: MINT, MEAR & FTSM.

Look at the following when deciding which to use:
1. The least variation in percentage price movement over as long a period as possible. E.g. MINT has 2.5% from lowest to highest price 2009.
2. The more historical data the better to determine how the price moved during market corrections.
3. The annual yield.
4. Monthly income, not quarterly.
5. Market Cap - the higher the better.
6. Average quarterly liquidity.
7. The securities in which they invest. The safest would be bank term deposits but the ETFs mostly use govt, corporate and municipal bonds. You want to minimise corporate bonds for the purposes here of being in 'cash'.

You can use Beyond Charts and Yahoo Finance to get all this info. TIP: use the Browser icon from the Chart window within Beyond Charts.

Based on these criteria my view is that NEAR and MINT are the top 2.

Anybody found any others?

Regards
Gary
« Last Edit: 09/04/2020, 03:18:03 PM by Gary Stone »
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Offline Gary Stone

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Re: AAA
« Reply #6 on: 13/02/2018, 11:30:57 AM »
PS to above post,

MINT can cost less in brokerage with a cents-per-share model broker because it is priced around $100 and NEAR is priced around $50.

With low interest rate returns this can also be a big factor.

Regards
Gary
« Last Edit: 13/02/2018, 11:55:00 AM by Gary Stone »
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