SGOV parks cash in the shortest Treasury bills available, targeting securities with less than 3 months to maturity. It's essentially a money market fund in ETF form, designed to squeeze a few extra basis points from idle cash while maintaining near-zero duration risk.
How It Works
The fund holds a rolling ladder of T-bills maturing within 90 days, constantly replacing expiring securities with new short-dated issues. With an average maturity around 45 days, it maintains stable NAV by holding bills to maturity rather than trading them. The portfolio typically contains 15-25 individual T-bills, weighted by market value with regular weekly rebalancing as new Treasury auctions occur.
Key Features
- Zero expense ratio makes it cheaper than most savings accounts or money market funds
- State tax exempt income unlike bank deposits or corporate money funds
- Trades intraday with immediate liquidity versus T+1 settlement for direct T-bills
Risks
- Yields track Fed funds rate — when the Fed cuts, income drops within weeks
- No FDIC protection, though default risk on 90-day Treasuries is essentially zero
- Opportunity cost versus longer bonds if rates fall sharply — you're locked at short rates
Who Should Own This
Perfect for investors sitting on cash earmarked for use within 6-12 months — house down payments, estimated tax reserves, or dry powder waiting for market opportunities. Also works as the cash sleeve in asset allocation models where you need same-day liquidity but hate earning zero at your broker.