Why I have a process to get more cash with my automated investments:

There’s a growing sentiment that cash will gain value as the Federal Reserve continues to hike interest rates. These rises can be attributed, in part, to governmental spending decisions and political agendas. Consequently, with the Fed’s intent to retract dollars from circulation and cool the economy, the value of cash is expected to appreciate compared to other hyped assets. Recognizing this, I’ve adjusted my investment strategy, funneling more cash with a plan to invest in discounted stocks in the future.

Disclosure: This post is meant for informational purposes only and doesn’t constitute financial, investment, or trading advice. Always conduct your own research and consult with a qualified financial advisor before making investment choices.

My Automated Investment Process – Focused on Cash:

(Note: I’ve kept my 401Ks and Traditional/ROTH IRAs separate from this setup.)

Initially, all my earnings are deposited into my primary checking account. I aim to keep an equivalent of 2-3 months of expenses in this account, consistently investing 25% of both my wife’s and my earnings into our shared investment account each month. Any surplus is channeled into our joint cash account with Wealthfront, boasting an APY of approximately 4.8%. (Interested? Here’s my referral link for the cash account and my referral link for the investment account).

Our Wealthfront cash account offers monthly interest, which I systematically reinvest into the Automated Bond portfolio, which gives a blended 30-day SEC yield of 5.83% today. Moreover, Wealthfront supports fund transfers from the cash account to other investment accounts once a user-specified limit is surpassed. So, I am reinvesting the interest I received from both my cash account and automated bond portfolio into the automated bond portfolio.

I am also maintaining some I bonds to protect some of my cash from inflation, as the concerns about inflation have not been fully resolved. 

Why Automated Bonds Portfolio, Especially When Prices Are Dropping?

Indeed, bond prices have been on the decline, a trend influenced by the rising interest rates.
Yet, I believe the potential for the stock market to face corrections is high. Indicators such as the Buffett Index and the S&P 500 P/E Ratio signal an inflated market. Furthermore, increasing debt mismanagement concerns hint at a market buoyed by quick-rich aspirations. I perceive bond prices, especially government treasury bonds, as currently being on discount. If my assessment is off and treasury bonds depreciate significantly, it would mean that the value of cash has equally plummeted. But I remain optimistic about the long-term recovery of the U.S. economy.

I also get the tax-loss harvesting automatically from WealthFront, which gives me some tax advantages.

Risks Associated with Bonds:

Defaults are a reality. But the beauty of ETFs lies in their diversification. Short-term bond price drops don’t concern me since I intend to hold onto them for the long haul. If bonds falter, it’s indicative of a broader market downturn affecting assets like stocks and real estate.
Every investment I make is with money I’m willing to part with. Thus, I’m not compelled to offload assets at a loss during economic downturns. This is why a portion of my reserves remains untouched, ensuring I can capitalize on opportunities, reinvesting dividends and interests from my cash and bonds in undervalued assets, patiently waiting for their value to rise.

Transitioning from Bonds to Stocks:

My portfolio once held a stocks-to-bonds ratio of 90:10. Given recent shifts in government and Federal Reserve policies; I’ve adjusted this to 60:40. I anticipate bonds appreciating once stock prices drop and cash becomes scarce. I’ll then shift my investments, aiming to revert to the 90:10 ratio and capitalize on underpriced stocks.

Conclusion:

While there’s no certainty that my strategy will pay off, what comforts me is its automation, eliminating emotion-driven decisions. If I were to be swayed by public opinion, I wouldn’t be investing in bonds, especially with prevailing narratives about their declining prices. Even if my approach proves ineffective, I’ve minimized potential adverse impacts, ensuring my family’s well-being remains unscathed. Yet, if my predictions hold, we stand to benefit from substantial returns.