Why not just buying bonds?
You buy a bond paying 3%, bond yields go up to 4% and you want to sell your bond, it will be less than the face value you bought it for. This isn't an issue if you want to keep it to maturity. But that's what SVB (and others) did and that creates its own problems.
If you're buying bonds, you're either parking money for a long time or you're betting on interest rates going down.
This Apple savings account will likely go down over time. Any time new branded savings accounts are marketed they always put super high returns to foster deposits and then they slowly trickle them down to a mean value that sits somewhere between 50~100 bps from what you get from a money market play.
As of 4/13 30-day SEC yield on ICSH is: 4.92%
As of 4/17, Marcus HYS is: 3.90%
[0] - https://www.ishares.com/us/products/258806/ishares-liquidity...
ICSH is an ultra-short bond fund with average duration of 0.42 years. So very little duration risk.
That said for the GP it’s only slightly more work to buy actual treasury bonds. Hold them to maturity and there’s no risk of losing money from interest rates going up. You know exactly what you’re getting and when. And if interest rates drop suddenly you can decide if you want to sell the bond and take a gain.
But are bonds liquid? Part of the appeal of a savings account is that it's still cash you can spend immediately by check/debit/cash with no need to sell/transfer to an account.
I agree that a 4% savings account is not a good way to invest money - but that's why I don't think they're comparable to bonds.
The fund will lag Fed hikes by a few months, but otherwise will yield the same as buying T-Bills directly.
Using trailing distribution data to compute yields will not work for a T-Bill fund in the middle of a Fed hiking cycle.
The yield to maturity should be the earning you get if you hold the fund until maturity and interest rates stay as they are today. It's possible Ishares is not reporting this number accurately.
There are different ways of measuring a fund’s yield, but at the end of the day this is mechanically how this fund works.
I guess to answer your question of why not get bonds - they just aren't comparable. One's effectively an investment that requires multiple steps to be used to purchase that expensive computer monitor on amazon, and the other you just select your payment to be a debit card and click purchase.
T-Bills sound relatively liquid, but a savings account still beats it at the cost of 1% interest (assuming 5% for the bonds).
If you’re living paycheck to paycheck and need to move money around to make small purchases, then it’s not for you, yeah. Money market funds are for savings, not money that will be imminently spent. But then so are savings accounts at banks (vs Checking accounts)
Yeah this is the part that I'm confused about because I think that savings accounts are federally restricted to 6 withdrawls a month? I could be completely wrong on that.
But yeah the target audience for this IMO - people who have maybe a few thousand saved up that they keep for emergency funds or semi-hot money for larger purchases. which matches the target iphone audience I think pretty well.
I bet they restricted accounts to less then 250k because they don't want to bother splitting it across banks when the target audience would be expected to only have several thousand.