For investors looking to put their cash on the sidelines to work, money market funds and other cash investments have proven to be valuable options for the past few years.
Cash strategies such as certificates of deposit (CDs), money market funds, or high-interest bank accounts have directly benefited from the high interest rate environment thus far. However, with rate cuts now underway, returns on these options will likely begin to diminish.
Recent insights from Natixis Investment Managers highlight why now may be a good time to divest from cash investments. Given that the Federal Reserve could continue slashing away at interest rates into 2026, Natixis notes that monthly income from cash investments could continue to dwindle each quarter.
One factor cash investors may not be considering is the importance of long-term value. The Natixis insights spotlight how stock exposure can outmatch long-term results from cash investments.
“Earning 5% in a CD or money market fund may sound great, but it can take 12 months (or more) to earn that full return. Conversely, participation in equity markets can offer the potential for short-term appreciation in certain market environments,” Natixis adds.
Merge Equity Exposure with Option Income
The Natixis Gateway Quality Income ETF (GQI ), showcases the advantages of utilizing an equity strategy. The fund can simultaneously provide consistent cash flow and broad exposure to the large-cap equity market.
GQI implements an options overlay over half of its equity portfolio to generate income for investors. This portfolio focuses on quality and includes large-cap companies with competitive cash flow, profitability, and balance sheets.
As such, the fund can give investors more cash flow while opening up opportunities for capital appreciation. Given that equity options can perform well in a rate-cut environment, GQI can benefit investors seeking income through a long-term lens.
GQI is currently delivering resilient cash returns for its investors. As of September 26th, 2024, the fund’s 30-day SEC yield is 9.37%.
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