After the wild week-and-a-half that Wall Street experienced, one thing was proven true: Warren Buffett remains the world’s smartest, best investor.
The Oracle of Omaha has been preparing for what is unfolding for more than two years, slowly building up Berkshire Hathaway’s (BRK-A, BRK-B) cash reserves to a record $334 billion. Because he has been a net seller of stocks for that entire time, he was preparing for the day when the stock market corrected.
In 2024, Buffett spent just $9.2 billion buying stock, but received $143.4 billion from their sale.
Buffett loves a bargain, and he loves buying stocks on sale. He has been waiting for the day when stocks are cheap and, in the words of former Federal Reserve chairman Ben Bernanke, use his “bazooka” of cash to scoop up good, discounted stocks.
Yet after the dramatic declines in the Dow Jones Industrial Average and equally impressive rebounds, is now the time to pull the trigger on your own bazooka? Should you be in the market buying stocks today?
I don’t think so, and I’m not sure we’ll have seen Buffett making any big moves yet. For all the gyrations of the Dow since President Trump’s tariff plan ignited a frenzy of selling, the benchmark index closed out last week down less than 5%. The S&P 500 is only off slightly more at 5.4%.
Although both indices are in correction territory, having fallen 10% or more from their all-time highs (the Dow on Dec. 4, the S&P on Feb. 19), their recent rallies suggest they’re not ready to capitulate just yet.
At the end of 2024, Buffett held $286.5 billion in U.S. Treasuries, more than double the $129.6 million held the year before. They are arguably one of the safest places you can park your cash and still earn interest.
The best vehicle to mimic the Oracle and shelter your money in Treasuries as you wait for the right buying opportunity just might be the iShares 0-3 Month Treasury Bond ETF (SGOV). It seeks to track the investment results of an index composed of U.S. Treasury bonds with remaining maturities less than or equal to three months.
The ETF has a management fee of 0.09% and is currently yielding an enticing 4.8%, making it competitive with high-yield savings accounts, but with lower counterparty risk than bank deposits, which are insured only up to $250,000 by the FDIC.
Backed by the full faith and credit of the U.S. government, Treasuries have virtually no default risk – we’ll have a lot worse problems if that happens – making SGOV a secure haven for capital preservation. The ETF minimizes interest rate risk, as prices are less sensitive to rate fluctuations compared to longer-term bonds.
In today’s environment of economic uncertainty, including potential inflation spikes or market volatility, SGOV offers stability and liquidity, allowing investors to park their cash without significant exposure to market swings. For risk-averse investors seeking a safe, flexible cash parking spot, SGOV stands out.
Managed by State Street Global Advisors, the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) is similar to GOV in providing investors stability and a safe place to hold onto cash
BIL also invests in U.S. Treasury bills with maturities of one to three months, and offers all the same advantages of SGOV regarding default risk, interest rate fluctuation exposure, and market volatility.
The ETF is slightly larger in terms of assets under management than SGOV ($46.9 billion versus $42.7 billion, respectively), but also has a slightly higher expense ratio of 0.14%. BIL’s yield is virtually the same at 4.77%. BIL’s high liquidity, with daily trading and quick settlement, allows easy access to funds, ideal for short-term needs or as a buffer during market downturns.
While similar to SGOV, BIL has a slightly longer maturity range, one to three months versus zero to three months. So where SGOV has marginally lower interest rate risk, as its holdings are less sensitive to rate changes, BIL may offer a touch more yield stability
For risk-averse investors prioritizing safety and flexibility, either ETF can serve as a reliable cash management tool.
