With the Federal Reserve expected to wait at least until 2018 to think about normalizing interest rates, it is time for investors to revisit where to put cash when cash is king.

Two-year Treasury notes are down to 67 basis points, the 10-year note is at 1.54% and the 30-year is yielding 2.25%.

Additionally, the S&P 500 is trading at a nosebleed 20.5 times trailing 12-month earnings.

But there is a U.S. government security that offers overnight liquidity and yields as high as 1.05%. It is called a savings deposit account.

For those in the camp to move a substantial amount of their portfolios to cash after the central bank fueled a reversal rally of 10%-plus post-Brexit, it is important to understand where a broker or financial adviser places the cash, which is called the cash sweep. If swept into money market funds, an investor isn't in cash at all but merely a basket of short-term risky securities that earn a paltry yield of 0 to 15 basis points, if anything. 

First, these underlying securities contain corporate credit risk-of default like any other corporate bond. Second, there is no legal guarantee of a par put from the manager.

Money market funds routinely maintain a fixed $1 par value, rather than mark to market, a convenient shell game trick that completely hides the underlying volatility of the basket of securities in the portfolio, convincing the holder he or she owns a cash equivalent rather than a portfolio of risky corporate senior-unsecured-debt obligations, which despite their seven-, 10- or 90-day maturity, are equal in recovery/default risk to corporate long bonds maturing 10 and 30 years from now. Some money market funds hold tax-free municipal bonds, all too commonly associated with risk-free, which is absolutely not the case, as investors learned the hard way in Detroit, cities in California and Rhode Island, and will soon learn in Puerto Rico.

Usually, the portfolio in a money market fund doesn't move at all in price, due to its very short duration until a shock event hits one of the securities, which was the case with the Lehman Brothers Holdings default. Investors realize that they don't own cash, but risky corporate debt, which in the case of Lehman Brothers Holding, opened on Monday, Sept. 15, 2008, at a bid-offer of 10 to 12 cents on the dollar.

Suddenly cash just lost 90 cents on the dollar.

About 35% to 40% of all investment company assets comprise money market funds, with 80% of corporations using money market funds to manage their cash balances and 20% of household cash balances comprising money market funds, according to a Securities and Exchange Commission report from 2009.

There is an investor perception that money market funds are insured by the manager due to the never-break-the-buck concept. In fact, there is absolutely no legal requirement or guarantee that money managers must never break the buck or shield investors from losses.

Many managers in 2008 compensated investors for losses in money market funds because it was good for business and they had the capital. Those without the capital, such as Reserve Fund, didn't and wasn't legally required to do so.

There is more than $3 trillion invested in money market funds, with retail depositors totaling $1 trillion and institutions the other $2 trillion.  

Last year, the SEC announced rule changes to address potential runs on money market funds, and they take effect on Oct. 14.

Funds catering to institutions, or prime money market funds, will begin to have a floating net asset value. But retail held funds will still maintain the $1 NAV level, continuing the illusion that these are actually cash-equivalent securities.

However, retail money market funds still face two important rule changes in October.

First, during times of stress when liquidity suffers within the securities held in the fund, the money market fund may impose a 10-day gate or halt in the redemptions period. In addition, investors still wishing to get out of their funds after that time frame can be subject to a 2% penalty fee.

Both these rule changes are testimony to the blatant fact that money market funds can be risky securities and have very little resemblance to cash. 

What's more, with the yields on money market funds so low, managers have had to cancel fees on those funds. But they actually haven't canceled them at all and have instead deferred them.

What this means is that if rates rise in the coming years, money fund managers can recoup those retroactive fees that were deferred, leading to the further suppression of money fund yields for many years, regardless of where rates go. 

So what is the takeaway? 

Should investors keep their cash in short-term Treasury bills? But there is very little if any interest.

Take duration risk on longer-dated Treasuries? No.

Try U.S. savings bonds that earn 10 basis points or 0.1%?

The answer is more obvious than we think: the common bank savings account. Investors can earn between 90 basis points to 1.1% on Internet-only savings accounts, which are 100% guaranteed by the Federal Deposit Insurance Corp., a guarantee as solid of U.S. Treasury bonds, yet they offer overnight liquidity and no duration risk.

In fact, investors would have to go all the way to the five-year Treasury note to earn a yield equal to the highest available online savings rates of 1.05%. The counter-party risk of the bank offering the rate is immaterial.

As long as it is FDIC guaranteed, even in the event of an FDIC bank seizure, accounts holders with $250,000 or less or $500,000 in a joint account for couples will have unrestricted access to their cash. If the FDIC can't honor its agreement, all investments will be set to zero, which would be the equivalent of a U.S. government default. 

But what about ultra-high-net-worth investors who have millions in cash? Is it logistically feasible to open 10 to 20 bank accounts or more?

Well, yes, there is now an application for that called MaxMyInterest. Although I have no equity or compensation relationship with this firm, MaxMyInterest is one of the only software provider solutions to placing sums of cash well above the FDIC limit in multiple banks in the most efficient manner possible.

Advisers don't like using a savings account as the cash sweep option because they can't control the assets. The game of the advisory business is to get the most assets possible under control.  

A simple solution for advisers is to establish an Automated Clearing House-based, fee-free link at the adviser's discretion between the client's investment and bank savings accounts.

Investors should ask their adviser to implement this.

And investors should also ask advisers where their cash sweep is and what it is yielding. They might find that isn't really cash at all.

This article is commentary by an independent contributor.