WEBVTT

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Hi, Eric here from Time2Retire. I've been chatting

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to one of my channel viewers recently and they're

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what I'd call a buy and hold equity investor.

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But lately, the SIP looks at the difference.

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Now, Fiona, not very lame obviously, has been

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moving a significant chunk of her portfolio into

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the money market funds and specifically ticker

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CSH2. Now, with the markets looking shaky, and

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inflation you're shooting to budge you wanted

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to talk you through her thinking on holding so

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much in cash equivalents i'm sure you'll agree

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that the current pension investment environment

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is exhausting we've seen the stock market take

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series of hits and surges and while fiona is

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a long -term believer in equities she's reached

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that point where she just wants to protect her

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with time and finish line now when markers drop

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she says she's basically got two options one

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watch your portfolio value swing by thousands

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of pounds a day or two move it to the sidelines

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now she's chosen the sidelines for a good proportion

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of her pot at the moment the goal is not to beat

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the market this quarter it's just to ensure that

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when the market eventually bottoms out she's

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got some capital ready to deploy into equities

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Now, I've asked Fiona why she picked CSH2, which

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is the Lixor Smart overnight cash ETF, instead

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of just leaving that cash in her SIP. Now, she

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quotes three different reasons why this works

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for her specific strategy. The first is yield.

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Now, most SIP providers are notoriously stingy

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with their interest on uninvested cash. By folding

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CSH2, she's getting a return. And this return

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tracks the Sonia rate in the Curran Chlyrid.

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That's given about 3 .5 to 3 .8 % annualized.

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Now the second point is that it's low volatility.

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CSH2 is designed to be incredibly stable. It's

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an ETF, but it doesn't move like a tech stock.

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It's steady and it climbs incrementally. Third

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up for Fiona is liquidity. Because it's an ETF,

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she can sell it instantly during market hours.

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She wakes up tomorrow and sees a generational

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buying opportunity in the FTSE 100, for example.

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So you can flip her CHS2 back into stocks in

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seconds. But I'm often asked, can I just lose

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money to inflation by sitting it in cash? Well,

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UK inflation is what? 3 .3 to 3 .5 % at the moment.

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CSH2 is holding essentially. It's inflation neutral.

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You're not getting rich, but you're not losing

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purchasing power. Now that could be a win compared

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to holding a global equity fund if it drops,

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say, 10 or 15 % in a market correction. Now essentially,

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getting paid a small fee to wait for a better

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entry point. Fearn was clear, though. This is

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just how she manages her SIP at a stage where

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return of capital has become, for her, more important

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than return on capital. Now, she uses CSH2 as

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a kind of volatility dampener. When the news

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is full of doom and gloom, she can look at the

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CSH2 balance and see this steady output line.

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Helps her sleep better. And it also prevents

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her from making these emotional panic cells on

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the remaining stocks. What do you think? It's

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not the most exciting strategy, but in 2026,

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I think there's a lot to be said for being boring.

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How are you handling current market savings?

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Are you staying fully invested or are you joining

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Fiona on the sidelines for a bit? Now let's have

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a look at the different types of these cash -like

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investments. Because one size doesn't fit all

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in the world of pension investing. Depending

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on which SIP platform you use. Whether it's AJ

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Bell, Hargreeves Landown, Interactive Investor.

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You might find that having a money market ETF

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isn't your only option. Or even your best option.

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So let's have a look at some of the others. You

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may have heard of OEICs. You've also got government

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-owned funds and the three big money market funds

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that some UK investors have on their short list.

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Now before we name names we need to talk about

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the structure. I mean I also, if you follow the

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channel will know that I also use CSH2. I like

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it as an ETF. Now on some platforms ETFs have

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capped fees which I like. However on other platforms

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buying an ETF can cost £10 per trade. While buying

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the standard fund and OEIC is free, you're adding

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small amounts to your cash pile every month,

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and no trading fees will simply destroy your

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yield. If your platform charges for ETF trades,

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you could look at these traditional funds instead.

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First up, I'm going to mention the Vanguard Sterling

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short -term money market. This is a staple for

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many. Its current yield is... around 3 .6 to

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3 .9 percent and it's incredibly low cost it's

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got an mcf of just 0 .12 percent and what i like

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about this is transparency it's a mix of very

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short -term certificates of deposits and government

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bills and for the vanguard platform this is kind

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of the easiest parking space for cash but next

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though is the royal london short -term money

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markets this is Often cited as a gold standard

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by some UK analysts. And it's a massive seller

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on platforms like Hargreaves, Lansdowne and Fidelity.

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And that's because historically it's squeezed

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out a tiny bit more performance than its rivals.

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Its yield is currently hovering around 4 .1%.

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That's gross. It's slightly more active than

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how it manages its cash instruments. And this

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gives the maximum possible return for this level

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of risk, potentially. And this is what people

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usually point to. Now, if you are genuinely worried

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about the stability of the banking system itself,

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then there is the third category, which is government

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liquidity funds, like the one from BlackRock,

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unlike CSH2 or the Vanguard Fund, which lends

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to high -quality banks. Government money market

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funds only invest in UK treasury bills and government

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-backed debt. Well, there's a trade -off, and

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the trade -off is the yield is usually a bit

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lower. Think around 3 .5 % to 3 .9%. The benefit

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is you're not taking on any bank risk. You're

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essentially lending to the UK government. Now,

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for the ultra -cautious investor, this is the

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final calls of call for safety. Now, when I'm

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looking at these, it's not just looking at the

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yield. I'm looking at platform costs. Does an

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ETF cost me more to hold than, say, a fund? Settlement

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time. Now, at CS Institute, I can sell instantly

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as long as the market's open. Some of these OIC

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funds can take 24 to 48 hours to settle. Now,

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if I'm looking explicitly to buy the dip in stocks,

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can I get my cash out fast enough? Now, third

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point is I always make sure that I'm buying an

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accumulation fund so that the interest is automatically

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rolled back in and keeps life much more simple.

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But there is no perfect fund, only one that fits

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your platform and your risk position. Now, whether

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it's the simplicity of Vanguard, the performance

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of Royal London, or the kind of bulletproof nature

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of BlackRock government funds, They all serve

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the same purpose, keeping you safe while storm

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passes. So we've talked about money market funds

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like the TSH2 and why they're great for kind

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of parking cash. But there's a question I sometimes

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get asked in the comments and that is why stay

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in a money market fund when I could build a bond

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ladder and kind of lock in. yield for years and

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just to recap though my money market funds like

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CSH2 or the Royal London Fund are floating rate

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instruments they pay me whatever the current

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base rate is take away a tiny fee now the good

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thing about this is if the Bank of England raises

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rates to fight like sticky inflation then my

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pay goes up immediately the bad though is if

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the economy cools and the bank cuts rates, then

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my yield drops overnight. I currently use money

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market funds for my emergency and kind of tactical

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cash. Money I might need in the next month. But

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for money I don't need for three or four or five

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years, then that's where a bond ladder comes

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in. So, What's a bond ladder? Well, a bond ladder

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is simply a series of individual bonds or gilts

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here in the UK and that mature at different times.

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So instead of one big pot, I might, for example,

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buy a one -year gilt, a two -year gilt and a

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three -year gilt. Now, why do this? Well, because

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unlike a money market fund, a gilt locks in the

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yield. If I buy gilt today yielding 4 % and the

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Bank of England cuts rates to say 2 % next year,

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it doesn't matter to me. My 4 % is locked in

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until the bond matures. So let's compare. Money

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market fund offers variable interest rate that

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changes daily with market conditions. While a

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bond ladder made up of gilts provides an interest

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rate that's fixed. When each bond is purchased,

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it's fixed. Money market funds are designed to

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keep your cash stable, whereas the value of a

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bond ladder can fall if you need to sell before

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the bond actually reaches maturity. Money market

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funds are flexible because you can sell them

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anytime you want. It gives you easy access to

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your cash. But by contrast, the bond ladder...

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is generally most effective when each bond is

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held until the maturity date and in practice

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that makes a money market fund well suited to

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holding cash temporarily such as while waiting

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for an opportunity to invest in some shares whereas

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a bond ladder it's actually better suited to

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providing a more predictable stream of retirement

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income so here's how i look at it for my own

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sip if i think inflation is peaked and the stress

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rates are about to fall the money market fund

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is actually a bad place to be in the long term

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because my income probably going to shrink in

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that scenario i'd rather use a bond ladder a

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lock in today's higher rates for the next few

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years now for those of you watching the channel

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who are investing outside of a sip there's a

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specific reason they sometimes prefer individual

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gilts over money market funds now in the uk capsule

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gains on gilts are actually tax free now while

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that doesn't matter inside your sip everything

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is tax sheltered if you're managing a bridge

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to retirement in a standard brokerage account

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a bond ladder or guilt can be significantly more

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tax efficient than money market funds that pay

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out taxable interest. Just a little food for

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thought if your SIP has already maxed out. So

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what am I doing now? Well right now to be honest

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I'm still very heavy on money market funds CSH2

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because I want that instant liquidity to jump

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back into the stock market if things don't go

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so well. However I get why people choose a bond

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ladder. It's for certainty they know exactly

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how many pounds will hit their account in two

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years' time, regardless of what the stock market

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or the Bank of England does. Now, don't forget,

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I'm not a financial advisor. None of this is

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financial advice. It's about financial education.

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So to wrap up, money from market funds, they

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give you flexibility. Bond ladders give you guarantee.

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Now, in a volatile 2026, I think there's a place

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for both in a smart SIP strategy. But I want

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to hear from you. Are you happy with floating

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with the base rates on a money market fund? Or

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are you starting to look at those yields with

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guilt before they disappear? Let me know your

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thoughts. Hit the like button. See you on the

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next one.