Managing cash and highly liquid securities may seem simple. After all, liquidity is fundamental to many portfolios.
However, navigating these liquid investments on your own can quickly become complicated.
For investors who want to pursue income on these assets, it’s easy to aim too high, stretching for yield and potentially taking on too much risk. But aim too low or too conservatively, and the investment could miss its return goals.
There are also other factors to consider—from investors’ unique time horizons, risk tolerance, and cash needs, to volatile interest rates and unforeseen market conditions.
When trying to navigate so many variables, it can be helpful to have a guiding hand.
Schwab’s holistic approach to liquidity management can help balance opportunities, trade-offs, and the complexities of short-term investments. Experienced Schwab professionals partner with investors to help determine their current and potential future cash needs. Our approach categorizes liquidity needs into three tiers: transactional, strategic, and opportunistic.
Each is designed to address client goals consistent with their established time horizon.
The transactional tier focuses on short-term stability and liquidity with frequent cash flows. It typically has a horizon of overnight to 3 months.
The strategic tier can be used to potentially earn a higher yield with investments that help to preserve principal. The time horizon is typically 3 to 12 months.
The opportunistic tier could be appropriate for liquidity needs that are longer term, typically 12 to 24 months. These investments may offer higher yields, but with somewhat less liquidity and greater volatility.
By providing the framework and tools needed to make decisions with clarity, Schwab’s approach can help prepare investors for the challenges ahead.
With the right guide, liquidity management can feel straightforward and achievable. Partner with Schwab to help optimize cash and liquidity allocations and build a more customized portfolio that works to meet investors’ goals.
Information provided herein is for general information purposes only. Neither Schwab Asset Management® products and strategies nor third-party products and strategies presented for consideration are investment advice or recommendations, but are intended to provide Schwab Advice representatives with additional information and tools to use in client discussions. Schwab Advice representatives, and not Schwab Asset Management, Charles Schwab Investment Advisory, nor the Liquidity Solutions Team are responsible for any investment recommendations or advice provided to the client based on his or her own particular situation.