I couldn’t believe how easy it was. I would earn a couple thousand dollars by the end of the year.

And all it took was a few simple clicks of the mouse. That’s it.

In one sense, I felt excited. But in another, I felt a little dumb. Why hadn’t I done this sooner?

You see, I opened a high-yield savings account.

Surely, I thought, my bank would start paying more as the Federal Reserve raised the benchmark rate. Not so much. And between that and the busy pace of life, I just sort of forgot about it for a while.

But earlier this year, I’d had enough. So I did some shopping around. And now, a significant chunk of our savings is earning a cool 4.3%.

My colleague Nathan Slaughter recently recommended something similar over at High-Yield Investing. We’ve referred to it before in a previous issue, but today I want to have an in-depth chat about it because I think many of our readers will benefit from it.

It all concerns a simple change you can make with some of the spare cash just sitting there in your brokerage account. I’ve already made the move, and you might want to consider doing it, too…

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You recently told your premium subscribers about a move they should make with their spare cash that, to put it bluntly, I can’t believe more people aren’t talking about…

Yeah, so I’ve got various Roth IRAs, rollover IRAs, and joint accounts – all with cash balances. I was a little surprised (dismayed might be a better word) to open my last quarterly statement and find that rates had barely budged.

This money was still earning a paltry 0.25%.

I did some digging and discovered my broker offered another liquid option paying 5.31% — 21 times as much as my brokerage sweep account. That’s more income in a month than I was getting in a year previously. So every day of inaction cost me money.

I called my broker and instructed him to transfer my cash into the higher-yielding money market fund. And it just might be the best financial decision I make this year.

Some of our readers may not know about sweep accounts, even though they probably have money in one. Can you explain?

When you get a new phone, it comes with certain factory default settings. They can be easily changed – but only if you take the time to do so. Well, sweep accounts are simply the brokerage’s default option. Without taking some initiative, this money will remain there indefinitely… quietly earning next to nothing.

Just like a storage facility you only expect to need for a few weeks, money can reside in sweep accounts far longer than you expect. Weeks quickly become months, and months eventually turn into years. That can be costly. And many investors are left unaware.

But in July, I made a strong case for redirecting that cash into higher-paying money market funds. The spread between these two cash-equivalent options (now close to 400 basis points) has never been wider, making this a no-brainer to switch.

Can you break down how money market funds work?

Money market funds invest in some of the safest, ultra-short term securities on the planet. Most safeguard their assets in Treasury Bills or repurchase agreements (collateralized loans to and from the Federal Reserve’s trading desk).

So-called prime funds take on a modicum more risk by investing in corporate-issued commercial paper and other high-grade financial notes, which aren’t backed by Uncle Sam and earn better rates. Some money markets even focus on municipal securities that throw off tax-free income.

One thing they all have in common: stable net asset values. Most strive to always stay at an even $1 per share. Falling below (or “breaking the buck”) is a scenario to be avoided at all costs because shareholders would flee.

Now, money market funds aren’t FDIC insured. But as long as NAVs stay level, your principal is safe. That’s why these funds have always been viewed as a safe haven to stash cash that may need to be accessed within the next year or two. They are great as a “rainy day” reserve. They also serve as a worry-free savings account for a big-ticket purchase on the horizon or a short-term financial goal such as a down payment or college tuition.

And with rates now approaching (or even surpassing) 5% (compared to 0.43% for the average sweep account), you can understand why assets have been flooding into money markets, driving assets to a record high above $5.4 trillion.

Can you tell our readers why it’s so important to consider doing this if they haven’t already?

If you’re a procrastinator, overcoming the inertia of doing nothing can be hard. That’s why so many people can’t find the time to cancel the gym membership or streaming service they seldom use. Of course, they all know this; they’re counting on it. Well, the same thing applies to your brokerage.

But let me give you a little example of why this is so important.

In April 2021, we added the Wisdom Tree Emerging Markets High Dividend (NYSE: DEM) to our portfolio. We wanted international exposure then, and this fund invests in dividend stocks from Brazil to Taiwan. And it offered an appealing yield of 4.2% — well above average at the time.

But that payout didn’t come freely. We had to assume a fair amount of risk (including foreign currency fluctuations). That is certainly reflected in the chart below (note: we exited the fund with a modest gain in 2022).

Now, I have nothing against DEM. It’s a well-built ETF that has earned a “gold medal” rating from Morningstar. But the point is, we can lock down the same 4%-5% payout today on far more conservative money market funds that carry none of those potential pitfalls.

Here’s the point… A 5% dividend yield is great, but not when the stock or fund loses 15%, leading to a net 10% decline.

I’m accustomed to telling people that yield is only half the picture and total return is the more important consideration. Money markets are the exception to the rule.

Any other tips for interested readers?

Personally, I like the Fidelity Money Market (Fund: SPRXX) fund. While that one checks off most of the boxes, a few readers have had trouble buying it. The availability of certain money market funds will vary from broker to broker. Just remember that this is more of an asset allocation call than anything else. Dozens of other strong contenders have similar portfolio composition, nearly identical payouts, and the same level $1 NAV.

Fees will obviously be a top consideration. And I’m partial to “prime” funds, which invest in a wider universe of securities and often carry slightly richer yields in exchange for a a tiny bit of additional risk. Feel free to explore the options offered by your brokerage.

P.S. Want to know the only thing better than a dividend payout hitting your account every quarter? How about a dividend every month…

If you’re tired of waiting around to get paid, check out these 12 monthly dividend payers. There’s no day trading involved, no crypto, no fancy options plays… And the average yield is 7.8%. Just simply put them in your portfolio and watch the money roll in. Go here now to learn more.