Vanguard’s money market funds have some of the best rates currently & that’s what we’ll be talking about in today’s video:
1. What’s Vanguard’s core money market position?
2. How much is VMFXX, VMRXX, VUSXX, VMSXX, VCTXX & VYFXX yielding & how might you go about choosing one over the other?
3. What is Vanguard’s Cash Deposit settlement fund option?
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Vanguard is a renowned investment management company known for its wide range of funds that cater to different investor needs. When it comes to short-term investments or preserving capital, their money market funds are a popular choice. In this article, we will compare Vanguard’s Best Money Market Funds with traditional cash deposits.
Vanguard offers several money market funds, including VMFXX, VMRXX, VUSXX, VMSXX, VCTXX, and VYFXX. These funds are designed to provide stability, liquidity, and competitive yields, making them suitable for investors looking to park their cash for the short term.
Compared to traditional cash deposits, Vanguard’s money market funds have several advantages. The first notable benefit is the potential for higher yields. While cash deposits generally offer low interest rates, Vanguard’s money market funds aim to deliver higher yields by investing in short-term, high-quality debt securities. These higher yields can help investors earn more on their idle cash.
Another advantage of Vanguard’s money market funds is liquidity. Unlike cash deposits, which may have withdrawal restrictions or penalties, money market funds generally provide easy access to your money. Vanguard’s money market funds offer check writing and electronic transfer capabilities, allowing investors to conveniently access their funds when needed.
Diversification is also a key advantage of money market funds. By pooling funds from multiple investors, these funds can invest in a wide range of debt securities issued by various entities. This diversification lowers the risk associated with investing in a single cash deposit account or a specific institution. Vanguard’s money market funds focus on investing in high-quality, short-term debt securities, ensuring stability while generating competitive yields.
Vanguard’s money market funds are also backed by the expertise and reputation of the company. Vanguard has a long history of managing funds and is known for its low-cost investment philosophy, which benefits investors by keeping expenses to a minimum.
However, it is important to note that money market funds, like any investment, come with risks. Although they strive to maintain a stable net asset value (NAV) of $1 per share, there is still a chance of potential loss in the form of a slight decrease in NAV. Additionally, money market funds are not insured by the Federal Deposit Insurance Corporation (FDIC), unlike cash deposits, which are usually insured up to a certain amount.
In summary, Vanguard’s Best Money Market Funds offer several advantages over traditional cash deposits. With potentially higher yields, easy liquidity, diversification, and the expertise of Vanguard, these funds are a popular choice for short-term investments. However, investors should also understand the inherent risks involved and consider their own financial goals and risk tolerance before investing in any money market fund.
VMFXXX is my preference due to excellent rates.
How is VUSXX with all those Treasurys now !!!!! still safe ? Let us Know
Question: A bit new to this. We have a sizable amount (>150K) in a High Yield Savings account getting 4.5%, I didn't really know about these funds. Does it make sense to move the money into one of these funds since it's over 5%?
If you can do an example of the tax difference for 1) any residents who live outside of NY/CA, 2) CA residents, 3) NY residents, that'll be really nice and easy to understand! Plus, IRA, 401k, or taxable accounts differences.
Fidelity doesn’t let us buy these vanguard money market ticker symbols. Your videos are very knowledgeable and helpful. Thank you for sharing your knowledge and expertise.
I have on many occasions opened a vanguard fund for 3k then removed a large portion of the funds with no issue
Thank you for your great videos! Do Vanguard 529 accounts also have the same VMFXX for core position?
Maybe you touched on this and I missed it, but another difference of VMRXX is that it is an Admiral Class fund, which is only available to customers with holdings over a certain dollar amount. Usually it is fund specific, but in this case since it's a settlement fund, apparently it's based on whether a customer has any investment in the Admiral Class.
VUSB is what I use. Vanguard Ultra short bond fund. It has a 30 day yield at 5.41%
I have a very small amount (about $11,000) in a Vanguard IRA from my old employer. It’s just been sitting there and I haven’t looked at it really. Now I’ll have to go take a look and see if I want to keep it there and add a money market fund to it since I’m 59 1/2 I can withdraw if needed. Thx for explaining that!
Great video! Can you talk about Wealthfront? I’m getting 5.05% APY for 6mo because I joined from a referral and got a 0.5% boost for 3 months and then someone signed up from my referral so I got another .05% boost for another 3 months for a total of 6 so far. Of course if the base goes up my 0.05% boost goes up from the increased (or decreased amount). They have almost no fees for things! I know it’s very different from conventional brokerages but not really sure exactly how.
VMFXX: While the 7-day yield may currently be high, the YTD is 2.35% and the one year return was 3.77%. Certainly better than other brokerages' core money market fund for uninvested cash.
I know the current yields on money market funds including VMFXX, earning 5%+ is wonderful and really helpful to my plan.
Thank you for the great videos. After watching your MM Fund for Schwab, I moved my money to SNSXX that had been sitting in Sweep at .45%. I'm working on another $35K in sweep in E*Trade, do you know or anyone reading this comment know of a California Tax free Treasury MM fund off hand. This will save me a lot of time reading all the prospectuses. Thank you for your help in advance.
None of these are FDIC insured, of course. Because the funds are in short WAMs they seem safe, but are they held in street name, meaning if the brokerage went down, so would your funds…or is this irrational fear!
Hello, thanks for this informative video, it is very helpful to me.
I have funds in the VMFXX and l live and pay taxes in Maryland. Based on your video, I did a little research on tax-exempt dividends on MMMF in Maryland to confirm the information I consumed from this platform and it seems in Maryland, the MMMF dividends are exempt from state taxes.
Do you know if that is accurate? Here is the source of my information. https://www.marylandtaxes.gov/forms/Tax_Publications/Administrative_Releases/Income_and_Estate_Tax_Releases/ar_it11.pdf
etrade will let you buy vusxx, gabxx pays more 5.17
I have a personal Fidelity account, and a trust I manage has a Vanguard account. I am so envious of the VMFXX relatively great yield and relatively low expense ratio. VMFXX rulz!
Thanks Jen! I agree, VUSXX is a better deal for NYS residents than their NYS muni money market fund.
My wife's Vanguard IRA and Roth accounts have been fully invested for months if not years, so the VMFXX Settlement balance has remained far below $3000, like $100 to $300, for that entire time. Never a peep out of Vanguard about this.
Thank you for the information. Now I know that Vanguard and Fidelity have CORE money market funds that you don’t have to trade in and out of. Can you tell us why Charles Schwab and TD Ameritrade don’t have CORE mm funds and you only earn less than 1% on their fund that holds your excess cash?
Another great video! Thank you! Can you make a video to explain the treasury notes' interest calculation with coupons? Why the same maturation date with deferent coupon rate? Which one is better, higher or lower coupon? Or I should just go with the higher interest rate?
Am I correct that Vanguard really has only one “Settlement Account” option, VMFXX? None of the others mentioned really function as settlement or sweep accounts? Or am I missing one or another that does function similarly? Al the others must be manually bought or sold, ordinarily using the VMFXX settlement fund to do those transactions, if I have this right. I cant find this explicitly on Vanguard or the web. And I have had VMFXX for years but – now I realize I could have saved CA state taxes with VUSXX! But not sure I want the hassle … thinking about it. Thanks for your great vids and expertise!
My 401K plan at work only has VUSXX as the "safe" "cash" option.
tdameritrade won't let me purchase it in my personal account, they force everyone into the schwab funds.
I think vanguard seems to offer the lowest expense ratios and near the best performance. Unfortunately my 401K negates much of the benefit by taking fees.
Thank you for the information.
My VUSXX balance dropped to $45 for a few months after I transferred funds to another investment. Vanguard did not drop me from VUSXX
how do you know what your State tax % of dividends will be when you do your taxes?
VUSXX has the tax savings feature in a taxable account. Note that if you sell VUSXX then I have observed that the proceeds are available by 8AM the following morning in the settlement fund ready for trading or withdrawal.
As a retiree I have quite a significant amount of money in VMFXX (various accounts). No state income tax expose.
At least right now I don't know how people with some assets won't take advantage of these very low risk products…
Too bad I don't want a third brokerage account. Vanguard accts are definitely good (in many ways), but to pay another broker a fee. At least I can get their ETF's at other brokerages with no fee or charge.
Thanks for a great video. I am confused about taxes for the VUSXX fund as you didn't specify CA & NY state details. Is it 100% exempt from California state taxes? If yes, then it is better than the remaining 5 funds as long as we can move in and move out manually. Please clarify. Thanks in advance.
Totally off topic, Now that the rollout of the beginning of FedNow has started will payments we make through the big banks get posted immediately to the vendor? I hear some changes are happening. Lynn
How can VUSXX be 100% state tax dividends exempt when it only invests 63% in Treasuries? Please explain. Thanks
I've been using VUSXX instead of VMFXX because my income is low enough that I don't pay federal tax but I do owe state tax.
The problem I have as a fixed income investor is these money market funds don't have any guarantee for a set period of time. At least with a CD or T-Bill, I'm guarnateed a return for a set period of time. Not for me, IMO
I want to comment on the bank account options versus the money market fund options. I don't see any advantage to having a bank account as your settlement fund rather than a government money fund at the present time. The interest rate of 3.5% or 4.5% is a lot lower than the money market fund yields which are over 5%. Interest on both are state taxable (while interest in the treasury fund, which cannot be used as a settlement fund, may avoid state taxes, so there is a reason to move money to VUSXX, although you have to transfer back to the settlement fund before trading). Unless they give some service benefits, like bill pay and the ability to pull funds to pay bills, why would anyone do it? Getting FDIC insurance is pretty much worthless when compared to government mutual funds, because the underlying investments are backed by the US just like the FDIC. The only real risk in a government money fund is that interest rates will go up significantly, and there will be large redemptions that will require the fund to sell their holdings at lower prices and "break the buck." That has happened in a couple of non-government money funds during unusual times, but even then the losses were minimal. So I don't see any real advantage to FDIC insurance over government money funds in terms of safety of principal. So I don't think you're getting anything of value in return for accepting a lower interest rate. Maybe the market will change in the future and bank rates will be higher than money market rates, or maybe they will provide some compelling service advantages. But in my opinion, right now, it is just a bad move. If anyone thinks I'm missing something, I'd welcome a response.
Great video, I'm really impressed how quickly you can produce theses on such short notice! Thx. FYI, I've tried to buy in to Vanguard's money market funds from other institutions, to take advantage of their superior rates. Ameritrade will let you buy them, but for a $75 transaction fee. Fidelity won't even let you place an order! So it looks like it's best to open a Vanguard account if you want these rates, which I am considering.
Thank you for showing us the different money market funds
My son has a Roth IRA account and he has the VMFXX. He did drop below $3000 and they did not kick him out
If a fund could be exempt from a percentage of state taxes, will this show on year-end tax forms? Like how much is state taxable, and how much is exempt? Or do I have to figure this out somewhere else?
Thank you for the video
I received the email from Vanguard to change my settlement money to the cash deposit option but didn't know what to do. Thanks to this video, I understand that the VMFXX is a good place to park my money, for now.
Vanguard also has a Cash Plus Account currently paying 4.5% interest. It was offered to me on a limited investor basis as apparently it's being rolled out.