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Best place to keep short term cash/operating capital?

Ok, is there really any reason I can't keep my personal expenses/small business expenses in a bond fund or something like that for 6 months to 1 year projected expenses. For a few years now I've been keeping it in an online money market, which had the best rates in the country back when I started. Now they're not at all near the top. I do NOT want to just keep hopping from bank to bank, but I do want the overall best deal I can get. I understand that if I put cash into a bond fund, then over the years the average rate of return would strongly outpace any money market or money market fund. I also understand that there is a chance that the bond fund could lose a small amount over a 6 month period, but this wouldn't exactly be the crisis of a lifetime. I can't be that risk averse or I'll never take the money out from under my mattress. It's not like all is going to fall apart if things don't work out down to the last penny. Assuming there are no transaction fees for once a month transfers to my checking account, and that I can stomach a minor dip every once in a while, then why not just skip the moneymarket accounts/funds altogether and go with something that gives me a little more without hopping around? Can anyone tell me why this would be a bad idea???

Public Comments

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2. I'd have to agree with you. We had a laugh yesterday at my company's quarterly financial meeting that our cash reserves are earning so little that we might as well just invest in a SAFE. Lol, but seriously, rates are garbage right now - but unlike many other businesses, at least you're not sitting on a loss. It's genuinely a matter of how risk-averse you are - I've watched some of my personal bond funds drop by as much as 70% in the last 9 months - so...... don't fool yourself into thinking bonds are any more stable than stocks. Me personally, I would leave 50% where it is, put 30% into conservative bonds and treasuries, and 20% into conservative stock funds. Diversity is the key word - when stocks tank, bonds do well, and vice versa.... Also, if you're under 40, maybe be a bit more aggressive and go with some moderate or international funds...
3. If the cash is operating capital, it should be repatriated back to your small business, the whole point is to grow your business. If your money is tied up elsewhere then it will be difficult to grow when the opportunity arises. However on the flip side, given the current economic situation, growth opportunities might be limited and your cash would be better spent on various investment vehicles. You have to asses how much risk you are willing to take on and how long you want to invest for and then make your investment decision based on your risk profile. In my opinion in this economic climate, reduce your operating cash by 30-40% and invest it, and if you are willing to assume a little more risk, there are quite a lot of cheap stocks out there now which have very profitable business models, you could try your hand at that. Good Luck