📢 We've launched! Get 15% off our brand-new bond courses thru 11:59PM ET on 4/30/2024 for Financial Literacy Month - enter coupon code bondfans2024 at checkout - see links below for more details! ⭐ Bond Beginners (our foundational-level bond course): www.diamondnestegg.com/bond-beginners ⭐ Bond Masters (our intermediate-level bond course): www.diamondnestegg.com/bond-masters ⭐ Or get both & save $100: www.diamondnestegg.com/home#_paa2isucf ⭐ Join our super-supersaver membership for regular market updates & monthly live member Q&As 👉 th-cam.com/channels/nexoc6tvesvcCEzZhmI-Ag.htmljoin SOURCES: www.fidelity.com/mutual-funds/mutual-fund-spotlights/money-market-funds www.schwab.com/money-market-funds investor.vanguard.com/investment-products/money-markets www.baskbank.com/products/interest-savings-account www.ici.org/research/stats/mmf www.investor.gov/introduction-investing/investing-basics/investment-products/mutual-funds-and-exchange-traded-5 www.investor.gov/introduction-investing/investing-basics/glossary/money-market-fund Thanks for visiting our personal finance channel! We hope this content will help fast-track your financial journey! Everyone's financial journey is different. Please note that: 1) there are questions/ comments which I will not be able to answer without fully understanding your financial, personal & other circumstances & 2) we will not ask you to call us or send us money in the comments on this channel or any of our other social media accounts, so if you see comment(s) along those lines, it is most likely spam - PLEASE DO NOT ENGAGE WITH SPAMMERS OR GIVE OUT YOUR PERSONAL INFORMATION FOR YOUR OWN SAFETY.
Jennifer, thank you so much for your financial updates. What is your opinion on Fidelity Government Cash Reserves? Is this account worth it? I seem to be having a hard time tracking its performance since cash back deposits from the Fidelity Visa are added randomly.
Wow Jenn! You always seem to be reading my mind. It must be your super power! 😂Your videos are always right there to answer the questions at the top of my mind. Seriously, I'm sure, given the current financial environment, many people have the same questions as I do, so your videos are very timely. You're still a superhero, though. Keep up the great work!
The asset composition difference between the two is significant. While yield-chasing isn't a bad thing in a healthy market, current monetary conditions are deteriorating. FZDXX has a very high % invested in commercial paper. In a collapsing bond market default rates may rise. In context, the Reserve Primary Fund's 1.5% position in "Junk" was enough to cause an investor "run". FDRXX is just over 15% commercial. Of note, I am not inferring that FDRXX's 15% is qualitatively junk (as was RPF, 1.5%) but since it's difficult to dig deeper with Fidelity into that 15%, I will be off-loading my position when markets deteriorate towards a S&P of 3200.
Great Video! I am split between Schwab, Fidelity & Vanguard with my trades. One thing I found out that is relevant to this video is that with Fidelity you can set their MM funds as your default cash position. Meaning you can buy trade directly from say for a stock or ETF without deliberate action and waiting for the funds to settle. With Schwab on the other hand you have to buy their MM fund and then deliberate sell it. I called in to to ask about it a few months back and they confirmed it. Therefore you wait until the funds settle. I've been a subscribed to your channel for a year now and frequently recommend you to friends and family. Thanks for all you do!
with vanguard, ur money iddle and setle money is defualt into vmfxx too. when u buy stock or etf or their fund, they will buy ur stuff with teh share. IMO i think what they did is sell ur money fund share, while that is settle, they giv eur credit equal to the share u sell and pay for it with that instead. same way when u xtransfer money from a bank acct into a broker and they give ur credit on teh amount u xfer over and u can use that credit to buy til the xfer is complete.
Wow...timing is everything Jemm. This has been the #1 topic of discussion at our house this week. VUSXX is our park of choice. Many thanks for calming the lady of our house. (at least for now :) )
One thing individual investors need to think about is "how liquid do I actually need to be." If it's money you definitely want for expenses in the next year or two, but also money you're not going to spend in the next few months, it doesn't need to be as liquid as a money market fund. A short-term T-bill ladder is less liquid, but may give better yields than a fund.
CD ladders are paying much better than TBills right now. In fact, you may be able to dump those tbills for a nice profit (since rates recently started dropping) and use the proceeds to fund CD’s in the low 5’s.
This was so educational. Thank you so much! I had a chunk of my Roth money in SPAXX and wanted to learn more about it. Your video explained everything. So helpful.
Just a FYI ... Vanguard's settlement fund is the VMFXX where money for buying and selling securities is held. Schwab's settlement fund where money for buying and selling securities is held is their bank sweep which is FDIC insured but has a low, 0.45% as of today, interest rate. If you want to be in one of their money market funds you need to trade into it.
@@timm2954 I am using this in my IRA so I can't answer with 100% accuracy. But according to Vanguard it is considered a taxable Money Market. Looking at the holdings, US government obligations and US T Bills are a minor part of their holdings. VUSXX is their Treasury Money Market but it holds other securities as well. I guess the best people to answer the question would be Vanguard.
@@timm2954 You could look into Vanguard Treasury Money Market Fund-(VUSXX), currently 71% treasuries, 4.69% seven day yield, 4.79% compound yield. The expense ratio is .09, vs .11 for the Federal M.M. (VFMXX). It's not a settlement fund though.
For the "problem" at 20:50 (too much cash), one could use an FDIC deposit sweep program. Your cash will be spread among many banks, each with separate insurance. It will look like one balance in your account, though it will be a sum of many.
Asked Fidelity this question a week or so ago and correct that when the 250k can't be accommodated and is parceled out each parcel is an account and insured.
i think the US Treasury MM funds are better because they are not taxed if you have a state income tax. As you can see from Vanguard the rates for the other two MM funds are not much different. Fidelity has it's own Treasury Only MM fund but it generally pays less than Vanguard due to its higher admin fees. Another option is Treasury Direct but the money isn't as liquid as the MM fund.
Thank you! I just recently started viewing your videos and I love your down to earth explanations of things I thought were much more complicated. You have been of tremendous help to me.
I was excited until I find they are very limited on what type of trusts they will open an account for. I am looking for a bank that accepts irrevocable trusts and/or trusts that have different grantor.
Vanguard uses its VMFXX fund as its settlement fund, which doesn't have a $3000 minimum, so it should be possible to open a Vanguard account and get VMFXX rates of return with less than $3000.
Does anyone know for sure if this is true in practice? I've noticed that the dividends distributed in the settlement fund invested in VMFXX don't line up well at all with the 7-day yield (and I know they won't match up exactly).
@@MWMMTKMThere seem to be two questions: 1) Do Vanguard settlement fund dividend rates match the Vanguard VMFXX fund rates? and 2) Do VMFXX rates match 7-day SEC yields for VMFXX? 1) In March, I had both a Vanguard settlement fund and a separate VMRXX fund. The VMRXX and VMFXX portfolios and rates are similar. For the month of March, both my settlement fund and VMRXX returned 4.6%. This supports the conclusion that Vanguard settlement fund rates match Vanguard VMFXX rates. 2) At the end of March, the 7 day SEC yield for VMFXX was 4.77%. I don't know of a way to look up what it was at other times during March, so can't come to any conclusions. It would be interesting to track the SEC yield for a whole month to see if it averages out to the actual distribution yield.
Please remember that we're still in a negative interest rate environment. You may earn 5% on your cash deposits but official inflation runs much higher, destroying the value of your cash.
@@garyzies3486 Found this dated April 12: "The Consumer Price Index for United States of America is 301.836 for the month of March 2023. The inflation rate year over year is 4.985% (compared to 6.036% for the previous month). "
I really enjoyed this. My only comment would be that those of us in high tax states like California/New York would not benefit from money markets because repos are taxable at state level and make up most of these funds. That makes the tbill funds you mentioned at the 20:50 market the most attractive because you save state tax
Thank's for the very timely MMF info. Vanguard does treat clients very well with 4.76% rates and a low fee of .10%, vs Schwab's .35% fee with a lower rate.
Great video. Since I already have a Schwab account, I looked into SWVXX. The expense ratio is 0.35%. That takes their 4.69% yield down into a saving account range of 4.35%.
Vanguard US Treasury Money Mkt VUSXX 7 day yield 4.71% the place to be until the pivot then it's time to start buying T Notes or Bonds! Thanks for the info!
I think I’m going to move my taxable account to VMSXX for the fed tax free, to save Roth conversion room on taxable income. I’ll only net about $200 less than VMFXX or VUSXX net taxes if I’m correct.
New viewer, now new subscriber. Thank you for making this video and all the great comments it has generated. Between both, all my questions have been answered.
Keeping our cash that’s not invested in TBills in Spaxx. Not concerned. We have some savings in CFG bank getting 4.90%, MMA. Hoping the regional bank crisis is over because I’d like to keep that money where it’s at. Thanks Jen!
I really like your channel. I mostly look at stock market content, but your videos on I bonds and these money market funds have helped me get yield on my rainy day fund
Very informative, thank you. It seems difficult to find clear explanations about MMF’s, this is exactly what I was looking for. Vanguard funds still looking good with their low expense ratios. Excellent presentation thx again
Video Request: can you show how to determine stock’s resistance level and other ways to determine the health of a stock by reviewing posted revenue, expenses, etc. Thanks for considering. I greatly appreciate your videos and explanations. Your videos are very easy to follow and comprehend.
Great video as always! Requesting a video on ultrashort treasury funds/ETFs and how they compare to these money market funds for parking cash in a 401k or IRA. Thanks!
Awesome - I did the three-month T-bill ladder with Fidelity based on an earlier video. Months ago I asked the Fidelity rep these same questions about safety. He couldn't say for certain. I knew there was more risk to an entity if they were a bank and not a separate arm but that's all I could find. This is such an impressive video!! I'm loving the SPAXX even more now - as always, thank you for such informative content.
I think it’s important to mention that when you invest in these money market funds, it is an investment as far as SIPC insurance is concerned and not cash so you can have $500,000 in one of those money market funds and still be covered in the case of a collapse
in case the fund becomes insolvent, but not a market collapse. in the case the MM fund goes down in value. that is not covered. its literally if the business goes down not the fund.
Thank you for sharing. Enjoy learning from your videos. My only real concern is if the whole thing melts down. If there is a default on the debt then treasuries could be in trouble. I know normally this is very unlikely, but we are not in normal times. Therefore cash (or gold?) would ultimately be the best option until the debt ceiling is raised. Please correct me if I'm mistaken. Am conservatively bent as I only have a certain amount to work with, retired. Have some unrealized loss that I can only hope for better days ahead. No more taking chances.
Nancy, Your Fears are NOT Unfounded. I'm worried about many things with This Gov't which is being grossly mismanaged. The same Ol is NOT the same Ol, Same Ol . With the current trading deals being fashioned by China & Brazil (for example) these two are going to trade commodities in THEIR own Currency, bypassing the American Dollar. The American Dollar is being Undermined by China (part of theri plan).
If the "whole thing" (the government) melts down, what is your cash going to be worth? Are supermarkets going to assay and process gold? Gold has very high transaction costs, and switching to a gold based economy world strikes me as extremely unlikely. It could happen someday, and running the kind of budget deficits we're been running is very troubling, but I don't know how to practically protect oneself from the doomsday scenario. Right now we're facing the twin threats of inflation and recession, following extraordinary fiscal and monetary government intervention during covid that has to be unwound. Making wise investment decisions in these times of extreme uncertainty is not easy. Money market funds strike me as the place to be right now.
Great content Jenn - keep it up! What do you think of 1 to 3 month Treasury ETFs like SGOV and BIL as alternatives to a government money market fund? It would be great to see a video comparing those vs govt money market vs buying treasuries directly. Particularly comparing the risks of each.
The value of shares in an ETF holding government bonds fluctuates with changes in the market value of the underlying bonds. For example, as the Fed has raised interest rates, the value of the bonds held by ETFs has dropped. If you own the bonds yourself, you can recoup this loss on maturity of the bonds, but with an ETF, you can't (unless you hold the shares until interest rates drop again). By contrast, MMFs that hold their share price at $1 do a much better job of protecting your principal than ETFs do.
@@ATHJD07 I think maybe Jennifer has done some videos on TIPS. I have no experience with TIP ETFs, but here are some musings: One of the reason for buying ETFs is to diversify risk. But if an ETF holds only US Gov't debt, that reason doesn't apply. Another reason in this case would be to take advantage of the inflation protection of TIPs. How well a TIP ETF would do this compared to owning the TIP outright is a worthwhile question. If you think you might need to sell before maturity, then depressed prices due to rising interest rates will affect both TIPS held outright and TIP ETFs. But when you own the bonds directly, you have a chance to recover lost principal on maturity. You don't have this opportunity with ETFs.
If you have a brokerage account that doesn't offer you a MMFund like JPM doesn't to park your cash use ETF's like USFR, TFLO or SGOV paying around 4.7% does a good job of keeping your capital stable and paying a nice div every month.
FYI SOFI bank has a 4% savings rate (no fees on 100% of your account) as well as 2 million FDIC insurance option for free.....if you are a direct deposit customer
I happen to be related to a Bank Of NY officer and can tell you that they prefer not to be called BONY (ha, ha, but don't change!) Also, they don't care for their ticker symbol, BK, frequently confused for Burger King! 🤣🤣🤣🤣I keep my idle cash in my Robinhood brokerage account which pays 4.4% interest on idle cash for their gold members (costs $5/mo) Since the break-even on the gold membership is about $1363 (=60/.044) of idle cash one does need some multiples of that amount for this to make sense. The etf TFLO is another good option sporting an SEC yield in the high 4% range and pays a monthly dividend.
I just read that Vanguard money market VMFXX is closed to new investors and that current account holders must limit the amount to 10,000. I did buy some brokered CDs and short term treasuries. I am with Vanguard, and I am wondering if Vanguard charges a fee to buy SPAXX with my Vanguard account, or if Fidelity charges a fee. Thank you so much for your videos. I listen to Suze Orman podcasts and she recommended your videos :)
The custodian thing is nothing special for money market funds. All mutual funds are kept under a custodian separate from the broker and the fund issuer.
Thanks, Jen, that is a thorough explanation of how it works, actually, are there any similar instruments in Euro? The dollar investments may suffer from the change of exchange rate for me. There were short term interest plan from German brokers, but after the pandemic crash, most of them are not an option now.
One additional point regarding Schwab. If you are enrolled in their Wealth Advisory Program your money in their Money Market Funds are not subject to the WAP service fees. These fees are calculated as 80 BPS for up to $1m and 75 BPS for the dollars over $2m. Other Schwab securities such as treasuries and CD’s are subject to those fees.
How is it that I've watched multiple vids without subscribing?!?! Rectified -- Just clicked the bell 🙂 Thank you for posting such informative, sensible, videos in a way that's easy to digest. Performing an excellent public service 👍
Why does VMFXX get all the attention? VMRXX is slightly better with .001% less fees (.010 vs .011) and .1% better 5 year return. Both have been around for over 30 years. Not a big difference but it's just a click to choose.
Thank you for your presentation . I hold Muni and other term bonds that where purchased by my fidelity managed account and now that i have taken over to a self managed account . I hope to sell these bonds and invest in other instruments - Apppreciate if you do a presentation on Buying and Selling Bonds
Could you elaborate on the Expense Ratios for these funds. This is what I found out when I called both Fidelity and Vanguard. Fidelity says their 7-day yield is "net" of the expense ratio. When I called Vanguard, they said their 7-day yield is NOT net of the expense ratio. So even though Vanguard offers a higher 7-day yield than Fidelty, Vanguard's quoted 7-day yield does not account for subtracting out the expense ratio. Can you confirm that is what you also found out.
Thanks to you Jen! Another Avenue for us savers. Have used your advice for several savings opportunities, am retired and have fixed income. After last year stock losses was not inclined to put more savings at risk. Your suggestions have helped make up for last years losses. Grateful for you
You. Are. Phenomenal. Answered every question I had in depth about MM including how they are insured. You really should be selling these videos!! Take my money! I can't imagine how much you've saved me already!! Grateful!
Love you Jen! I just started looking into money market fund in the last two weeks, and you video came right in time! Such a concise video loaded with so much useful information! A question, those money market funds carried by the large brokerages like Vanguard, Fidelity and Schwab, do not have transaction fees and short-term redemption fees, correct? Basically I am trying to figure out if I use any of them to park money temporarily, would I have flexibility selling them into cash anytime?
To different purposes. The MM is like a liquid holding account at your broker. Where you're parking your cash and can use it anytime to buy stocks or CD's or send it to your bank if you need cash. The t-bill is not liquid for the term of the bond. So even though the t-bill might pay a little higher the liquidity of the MM is a fair trade off for your ability to make a quick kill if something presents itself.
As an example suppose you have $100000 in 17 week maturity t-bill and it's the ninth week and Bill Gates get speared while visiting Kenya. As an emotional reaction Microsoft stock crashes to $100 but recovers in a couple of days. If you had $100000 in your Money Market fund you could now be holding 1000 share of MS.🤪
3 to 6 months of Treasury bills are good place to park emergency money as the market is liquid and you can sell them with a slight profit in current conditions if there is an emergency. CDs on the other hand is not a good place to park emergency money as the trading is thin and you don't get a good price. I have actively sold some Treasury bills to rebalance the laddering in retirement accounts. If done so in taxable accounts, I think the sales will be taxed as equity gains and not State tax free dividends.
Keeping mine liquid in VMFXX at Vanguard. 4.93% as of 5/8. Hate Vanguard, love their money market funds. Government MMF but higher than Fidelity’s prime MMF.
One of the options in my employer's 401k is called the Key Guaranteed Portfolio Fund. It doesn't describe itself as a money market, but apparently, it invests in investment grade short-term bonds across a range of asset-backed securities. It seems to function like a money-market fund in that it aims to maintain a stable value, but it does not list a net asset value or past performance.
I have my 401k at Vanguard in a similar fund, specifically for our firm. It's my cash bucket and I use it to pay annual IRS taxes as I draw it down monthly. Earns a little over 2% and that's OK with me.
So this means its an actual liquid fund where you can withdraw on demand, say, to stash your 6-12 month emergency funds? I've never heard of this concept, and I'm wondering if I can pass the info onto the powers-that-be at UPS
I'm sure you know this already but PNCs High Yield Saving was just raised to 4.30% but if I remember that is one of the banks that is on the watch list.
Thank you so much for clarification ❤I spoke with Fidelity representative and we also can just park money in cash there if I have concerns about Money mkt funds. I'm trying to decide what would be safer, bc Spaxx could lose money, and we don't want that.
Spaxx could lose money but very unlikely. Giving up yield is a sure way to lose money. You should consider a treasury money market fund, especially if you are in a high-tax state.
@@Juli-ch8sd No Julia, it's not the same at all. Lehman brothers collapsed because it was an investment bank that made risky investments as a principle party. Fidelity is not an investment bank and does not make its own investments. It is primarily a record keeping company that manages other people's trust funds. Lehman's brokerage and fund clients didn't lose anything. The losses were incurred by people who engaged in transactions in which Lehman was a party, and the shareholders and creditors of Lehman itself. I don't know what it means to "park money in cash" at Fidelity. If it's in a fund, then you should be safe. If it's in a bank account then you should be safe up to FDIC limits. If you're lending Fidelity money then you're a creditor and have risk.
I think right now if you put money i the FDIC deposit sweep at Fidelity, it actually has a lower yield than a lot of HYSAs. If you are going to use Fidelity for parking cash, I'd personally go with MMF.
It's not safe from changes in short term interest rates because it doesn't try to maintain a $1 share value. Is it worth the extra interest rate risk for the additional yield?
I found vanguard's treasury money market lowest fee and high rate. Plus isn't upwards of 100% of distributions only taxed federally like the treasury products it uses?
📢 We've launched! Get 15% off our brand-new bond courses thru 11:59PM ET on 4/30/2024 for Financial Literacy Month - enter coupon code bondfans2024 at checkout - see links below for more details!
⭐ Bond Beginners (our foundational-level bond course): www.diamondnestegg.com/bond-beginners
⭐ Bond Masters (our intermediate-level bond course): www.diamondnestegg.com/bond-masters
⭐ Or get both & save $100: www.diamondnestegg.com/home#_paa2isucf
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SOURCES:
www.fidelity.com/mutual-funds/mutual-fund-spotlights/money-market-funds
www.schwab.com/money-market-funds
investor.vanguard.com/investment-products/money-markets
www.baskbank.com/products/interest-savings-account
www.ici.org/research/stats/mmf
www.investor.gov/introduction-investing/investing-basics/investment-products/mutual-funds-and-exchange-traded-5
www.investor.gov/introduction-investing/investing-basics/glossary/money-market-fund
Thanks for visiting our personal finance channel! We hope this content will help fast-track your financial journey! Everyone's financial journey is different. Please note that: 1) there are questions/ comments which I will not be able to answer without fully understanding your financial, personal & other circumstances & 2) we will not ask you to call us or send us money in the comments on this channel or any of our other social media accounts, so if you see comment(s) along those lines, it is most likely spam - PLEASE DO NOT ENGAGE WITH SPAMMERS OR GIVE OUT YOUR PERSONAL INFORMATION FOR YOUR OWN SAFETY.
Always enjoy your tutorials , thank you.
WHAT ABOUT VMRXXX FROM VANGUARD?
What about your thoughts on EWP ?
Jennifer, thank you so much for your financial updates. What is your opinion on Fidelity Government Cash Reserves? Is this account worth it? I seem to be having a hard time tracking its performance since cash back deposits from the Fidelity Visa are added randomly.
Thank you!!
Wow Jenn! You always seem to be reading my mind. It must be your super power! 😂Your videos are always right there to answer the questions at the top of my mind. Seriously, I'm sure, given the current financial environment, many people have the same questions as I do, so your videos are very timely. You're still a superhero, though. Keep up the great work!
You should also mention Fidelity's FZDXX, preferred class mmf. It has a $100k min, but has a higher yield than SPAXX
The asset composition difference between the two is significant. While yield-chasing isn't a bad thing in a healthy market, current monetary conditions are deteriorating. FZDXX has a very high % invested in commercial paper. In a collapsing bond market default rates may rise. In context, the Reserve Primary Fund's 1.5% position in "Junk" was enough to cause an investor "run". FDRXX is just over 15% commercial. Of note, I am not inferring that FDRXX's 15% is qualitatively junk (as was RPF, 1.5%) but since it's difficult to dig deeper with Fidelity into that 15%, I will be off-loading my position when markets deteriorate towards a S&P of 3200.
Great Video! I am split between Schwab, Fidelity & Vanguard with my trades. One thing I found out that is relevant to this video is that with Fidelity you can set their MM funds as your default cash position. Meaning you can buy trade directly from say for a stock or ETF without deliberate action and waiting for the funds to settle. With Schwab on the other hand you have to buy their MM fund and then deliberate sell it. I called in to to ask about it a few months back and they confirmed it. Therefore you wait until the funds settle. I've been a subscribed to your channel for a year now and frequently recommend you to friends and family. Thanks for all you do!
Moved all my assets from BBT to Fidelity a couple years ago. Fidelity is so easy to work with. Highly recommend.
with vanguard, ur money iddle and setle money is defualt into vmfxx too. when u buy stock or etf or their fund, they will buy ur stuff with teh share. IMO i think what they did is sell ur money fund share, while that is settle, they giv eur credit equal to the share u sell and pay for it with that instead. same way when u xtransfer money from a bank acct into a broker and they give ur credit on teh amount u xfer over and u can use that credit to buy til the xfer is complete.
Thank you for the info.
under rated comment right here!
Wow...timing is everything Jemm. This has been the #1 topic of discussion at our house this week. VUSXX is our park of choice. Many thanks for calming the lady of our house. (at least for now :) )
One thing individual investors need to think about is "how liquid do I actually need to be." If it's money you definitely want for expenses in the next year or two, but also money you're not going to spend in the next few months, it doesn't need to be as liquid as a money market fund. A short-term T-bill ladder is less liquid, but may give better yields than a fund.
Not much better, and if interest rates rise you made a mistake.
CD ladders are paying much better than TBills right now. In fact, you may be able to dump those tbills for a nice profit (since rates recently started dropping) and use the proceeds to fund CD’s in the low 5’s.
This was so educational. Thank you so much! I had a chunk of my Roth money in SPAXX and wanted to learn more about it. Your video explained everything. So helpful.
It's as if you read my mind and answered every single questions so perfectly and thoroughly. Thank you!
Just a FYI ... Vanguard's settlement fund is the VMFXX where money for buying and selling securities is held. Schwab's settlement fund where money for buying and selling securities is held is their bank sweep which is FDIC insured but has a low, 0.45% as of today, interest rate. If you want to be in one of their money market funds you need to trade into it.
Just wondering if the dividends from the VMFXX fund are exempt from state taxes because the funds primarily invest in US Treasuries?
@@timm2954 I am using this in my IRA so I can't answer with 100% accuracy. But according to Vanguard it is considered a taxable Money Market. Looking at the holdings, US government obligations and US T Bills are a minor part of their holdings. VUSXX is their Treasury Money Market but it holds other securities as well. I guess the best people to answer the question would be Vanguard.
Thanks for the info.
@@timm2954 You could look into Vanguard Treasury Money Market Fund-(VUSXX), currently 71% treasuries, 4.69% seven day yield, 4.79% compound yield. The expense ratio is .09, vs .11 for the Federal M.M. (VFMXX). It's not a settlement fund though.
I've had VMFXX for years and love it. ❤
Well paced, detailed and thorough, as usual.
Thank you!!!
You're doing a good service for the public. Thank you.
For the "problem" at 20:50 (too much cash), one could use an FDIC deposit sweep program. Your cash will be spread among many banks, each with separate insurance. It will look like one balance in your account, though it will be a sum of many.
Asked Fidelity this question a week or so ago and correct that when the 250k can't be accommodated and is parceled out each parcel is an account and insured.
Does swab allow trust accounts?
i think the US Treasury MM funds are better because they are not taxed if you have a state income tax. As you can see from Vanguard the rates for the other two MM funds are not much different. Fidelity has it's own Treasury Only MM fund but it generally pays less than Vanguard due to its higher admin fees. Another option is Treasury Direct but the money isn't as liquid as the MM fund.
Thank you! I just recently started viewing your videos and I love your down to earth explanations of things I thought were much more complicated. You have been of tremendous help to me.
UFB Direct savings is at 5.02% No fees, no min, FDIC. I also use VUSXX for state tax exempt interest in my taxable brokerage acct. Great video.
Thanks for sharing!
I was excited until I find they are very limited on what type of trusts they will open an account for. I am looking for a bank that accepts irrevocable trusts and/or trusts that have different grantor.
Amazing explanation! Simple, to the point, and great use of examples. Thank you so much🙏🙏
Always the right video at the perfect time!
Vanguard uses its VMFXX fund as its settlement fund, which doesn't have a $3000 minimum, so it should be possible to open a Vanguard account and get VMFXX rates of return with less than $3000.
Does anyone know for sure if this is true in practice? I've noticed that the dividends distributed in the settlement fund invested in VMFXX don't line up well at all with the 7-day yield (and I know they won't match up exactly).
@@MWMMTKMThere seem to be two questions: 1) Do Vanguard settlement fund dividend rates match the Vanguard VMFXX fund rates? and 2) Do VMFXX rates match 7-day SEC yields for VMFXX? 1) In March, I had both a Vanguard settlement fund and a separate VMRXX fund. The VMRXX and VMFXX portfolios and rates are similar. For the month of March, both my settlement fund and VMRXX returned 4.6%. This supports the conclusion that Vanguard settlement fund rates match Vanguard VMFXX rates. 2) At the end of March, the 7 day SEC yield for VMFXX was 4.77%. I don't know of a way to look up what it was at other times during March, so can't come to any conclusions. It would be interesting to track the SEC yield for a whole month to see if it averages out to the actual distribution yield.
Vanguard pays out every 30 days, real nice
Please remember that we're still in a negative interest rate environment. You may earn 5% on your cash deposits but official inflation runs much higher, destroying the value of your cash.
@@garyzies3486 Found this dated April 12: "The Consumer Price Index for United States of America is 301.836 for the month of March 2023. The inflation rate year over year is 4.985% (compared to 6.036% for the previous month). "
I just transferred some cash to SWVXX yesterday. Thanks for the knowledgeable information!
I really enjoyed this. My only comment would be that those of us in high tax states like California/New York would not benefit from money markets because repos are taxable at state level and make up most of these funds. That makes the tbill funds you mentioned at the 20:50 market the most attractive because you save state tax
Thank's for the very timely MMF info. Vanguard does treat clients very well with 4.76% rates and a low fee of .10%, vs Schwab's .35% fee with a lower rate.
The fees are included in the calculation of the 7-day yield so you don't need to add that into your comparison if you are comparing 7-day yields.
@@razzberrylogic Thanks, I did not know the Schwab fees were included in the yields
Great video. Since I already have a Schwab account, I looked into SWVXX. The expense ratio is 0.35%. That takes their 4.69% yield down into a saving account range of 4.35%.
No, yield is always quoted net of expenses.
@@headlibrarian1996could you explain how that's figured in a bit detail? Always wondered how ER is figured into yield of brokerage money markets.
@@headlibrarian1996I agree with you when buying SWVXX for short period time awaiting good time to buy specific stocks.
We have our cash in VMFXX. Thank you for this informational and helpful video.
You’re welcome
I wish you would include expense ratios. That is as important as all the information you covered.
I was just thinking that!!👌👍
Are the reported yields before or after the expenses are subtracted?
@@dwight_klaus2981 after
.35% expense ratio for Schwab and looked like .10% for good ole low fee Vanguard with a higher rate, I'm not sure what Fidelity is.
I'm personally with FDRXX in my brokerage account, slightly lower expense ratio and slightly higher 7 day yield than SPAXX.
What if US defaults on debt(or dollar is no longer reserve currency ) - dollars or US treasuries collapse ?
Vanguard’ s VMFXX 4.77 % 7 day SEC yield. Expense ratio .11%
Vanguard US Treasury Money Mkt VUSXX 7 day yield 4.71% the place to be until the pivot then it's time to start buying T Notes or Bonds! Thanks for the info!
I think I’m going to move my taxable account to VMSXX for the fed tax free, to save Roth conversion room on taxable income.
I’ll only net about $200 less than VMFXX or VUSXX net taxes if I’m correct.
Vanguard's current 4.77% in my inherited IRA VMFXX is providing a new bar to exceed in my dividend stock and ETF investing.
New viewer, now new subscriber. Thank you for making this video and all the great comments it has generated. Between both, all my questions have been answered.
Keeping our cash that’s not invested in TBills in Spaxx. Not concerned. We have some savings in CFG bank getting 4.90%, MMA. Hoping the regional bank crisis is over because I’d like to keep that money where it’s at. Thanks Jen!
You’re welcome & thanks for sharing!
I really like your channel. I mostly look at stock market content, but your videos on I bonds and these money market funds have helped me get yield on my rainy day fund
Was looking for what 7 days yield means, you saved me again!!
Very informative, thank you. It seems difficult to find clear explanations about MMF’s, this is exactly what I was looking for. Vanguard funds still looking good with their low expense ratios. Excellent presentation thx again
Video Request: can you show how to determine stock’s resistance level and other ways to determine the health of a stock by reviewing posted revenue, expenses, etc. Thanks for considering.
I greatly appreciate your videos and explanations. Your videos are very easy to follow and comprehend.
Excellent video for Money market funds, awesome job!
You really answered all my questions about Fidelity and Schwab money market funds.
really well-done video (and well timed... I was just scratching my head over how the MM funds have gotten so attractive)
Schwab also has a US treasury money market fund named SWSXX with a current seven day yield of 4.14.%
Great video as always! Requesting a video on ultrashort treasury funds/ETFs and how they compare to these money market funds for parking cash in a 401k or IRA. Thanks!
Awesome - I did the three-month T-bill ladder with Fidelity based on an earlier video. Months ago I asked the Fidelity rep these same questions about safety. He couldn't say for certain. I knew there was more risk to an entity if they were a bank and not a separate arm but that's all I could find. This is such an impressive video!! I'm loving the SPAXX even more now - as always, thank you for such informative content.
Glad you enjoyed the video!
Thank you. Thank you for taking time to explain this in deep detail.
WOW, great video. I've got some weekend work to do!😅 Thanks!!!
Very good information. Hate having cash sit around not earning anything.
Than you, thank you Jennifer. You just answered the exact question I was thinking about re:Fidelity’s SPAXX account. Re: it’s relative safety.
I say “Yay!” to money market funds, but only as a second tier or as a backup to a traditional savings and checking account.
Thanks for sharing!
I think it’s important to mention that when you invest in these money market funds, it is an investment as far as SIPC insurance is concerned and not cash so you can have $500,000 in one of those money market funds and still be covered in the case of a collapse
Unless of course too big to fail fidelity goes down.
She did mention that
@@mitchell5828can you elaborate?
in case the fund becomes insolvent, but not a market collapse. in the case the MM fund goes down in value. that is not covered. its literally if the business goes down not the fund.
Thanks for a great overview. Your channel is a wealth of information.
Thank you for sharing. Enjoy learning from your videos. My only real concern is if the whole thing melts down. If there is a default on the debt then treasuries could be in trouble. I know normally this is very unlikely, but we are not in normal times. Therefore cash (or gold?) would ultimately be the best option until the debt ceiling is raised. Please correct me if I'm mistaken. Am conservatively bent as I only have a certain amount to work with, retired. Have some unrealized loss that I can only hope for better days ahead. No more taking chances.
Nancy, Your Fears are NOT Unfounded. I'm worried about many things with This Gov't which is being grossly mismanaged. The same Ol is NOT the same Ol, Same Ol . With the current trading deals being fashioned by China & Brazil (for example) these two are going to trade commodities in THEIR own Currency, bypassing the American Dollar. The American Dollar is being Undermined by China (part of theri plan).
If the "whole thing" (the government) melts down, what is your cash going to be worth? Are supermarkets going to assay and process gold? Gold has very high transaction costs, and switching to a gold based economy world strikes me as extremely unlikely. It could happen someday, and running the kind of budget deficits we're been running is very troubling, but I don't know how to practically protect oneself from the doomsday scenario. Right now we're facing the twin threats of inflation and recession, following extraordinary fiscal and monetary government intervention during covid that has to be unwound. Making wise investment decisions in these times of extreme uncertainty is not easy. Money market funds strike me as the place to be right now.
If there is a US default then cash isn't safe either
Great content Jenn - keep it up! What do you think of 1 to 3 month Treasury ETFs like SGOV and BIL as alternatives to a government money market fund? It would be great to see a video comparing those vs govt money market vs buying treasuries directly. Particularly comparing the risks of each.
I’m interested in this as well
The value of shares in an ETF holding government bonds fluctuates with changes in the market value of the underlying bonds. For example, as the Fed has raised interest rates, the value of the bonds held by ETFs has dropped. If you own the bonds yourself, you can recoup this loss on maturity of the bonds, but with an ETF, you can't (unless you hold the shares until interest rates drop again). By contrast, MMFs that hold their share price at $1 do a much better job of protecting your principal than ETFs do.
@@Matt-dc5eq Any thoughts on iShares STIP ETF?
Also interested about this!
@@ATHJD07 I think maybe Jennifer has done some videos on TIPS. I have no experience with TIP ETFs, but here are some musings: One of the reason for buying ETFs is to diversify risk. But if an ETF holds only US Gov't debt, that reason doesn't apply. Another reason in this case would be to take advantage of the inflation protection of TIPs. How well a TIP ETF would do this compared to owning the TIP outright is a worthwhile question. If you think you might need to sell before maturity, then depressed prices due to rising interest rates will affect both TIPS held outright and TIP ETFs. But when you own the bonds directly, you have a chance to recover lost principal on maturity. You don't have this opportunity with ETFs.
If you have a brokerage account that doesn't offer you a MMFund like JPM doesn't to park your cash use ETF's like USFR, TFLO or SGOV paying around 4.7% does a good job of keeping your capital stable and paying a nice div every month.
FYI SOFI bank has a 4% savings rate (no fees on 100% of your account) as well as 2 million FDIC insurance option for free.....if you are a direct deposit customer
I happen to be related to a Bank Of NY officer and can tell you that they prefer not to be called BONY (ha, ha, but don't change!) Also, they don't care for their ticker symbol, BK, frequently confused for Burger King! 🤣🤣🤣🤣I keep my idle cash in my Robinhood brokerage account which pays 4.4% interest on idle cash for their gold members (costs $5/mo) Since the break-even on the gold membership is about $1363 (=60/.044) of idle cash one does need some multiples of that amount for this to make sense. The etf TFLO is another good option sporting an SEC yield in the high 4% range and pays a monthly dividend.
Thanks for sharing (it's unfortunate for them, but everyone does call them BONY in the industry 🙂)
Excellent explanations of MM funds. Thank you!
I just read that Vanguard money market VMFXX is closed to new investors and that current account holders must limit the amount to 10,000. I did buy some brokered CDs and short term treasuries. I am with Vanguard, and I am wondering if Vanguard charges a fee to buy SPAXX with my Vanguard account, or if Fidelity charges a fee. Thank you so much for your videos. I listen to Suze Orman podcasts and she recommended your videos :)
I have a UFB Direct savings account at 5.02 % It's a division if Axos bank.
Interactive Brokers pay 4.5% on usd buy sitting in your account. Best place to park cash
BEST explanation of this subject. New Sub!
The custodian thing is nothing special for money market funds. All mutual funds are kept under a custodian separate from the broker and the fund issuer.
Wow. I have learned so much from your channel.
Just subscribed.
Thanks 👍
Thanks, Jen, that is a thorough explanation of how it works, actually, are there any similar instruments in Euro? The dollar investments may suffer from the change of exchange rate for me. There were short term interest plan from German brokers, but after the pandemic crash, most of them are not an option now.
Jennifer, as always, you are awesome. THANKS.
I'm not worried about Fidelity failing, I'm worried about the custodian bank (e.g., BONY) failing. Then what happens to our money?
BONY is on too big to fail list. Fidelity CMA has a check writing service, which uses UMB bank, a small rural bank in Kansas. That's the real issue.
@@thirionj Pardon my poor knowledge. I can barely go around California with my Google map.
@@thirionj Good to know. Thanks.
One additional point regarding Schwab. If you are enrolled in their Wealth Advisory Program your money in their Money Market Funds are not subject to the WAP service fees. These fees are calculated as 80 BPS for up to $1m and 75 BPS for the dollars over $2m. Other Schwab securities such as treasuries and CD’s are subject to those fees.
Bro BONY houses money for the federal govt. They ain't going nowhere. Which is also prob why they're not in the news.
You should also mention SNXX above 5% great video
How is it that I've watched multiple vids without subscribing?!?! Rectified -- Just clicked the bell 🙂 Thank you for posting such informative, sensible, videos in a way that's easy to digest. Performing an excellent public service 👍
Also vanguard vmfxx has an expense ratio of .11 percent
Why does VMFXX get all the attention? VMRXX is slightly better with .001% less fees (.010 vs .011) and .1% better 5 year return. Both have been around for over 30 years. Not a big difference but it's just a click to choose.
Hi Jennifer, Thank you for all you do. I’m going to stick with the MM fund for now. Lynn
Thanks for sharing!
Thank you for your presentation . I hold Muni and other term bonds that where purchased by my fidelity managed account and now that i have taken over to a self managed account . I hope to sell these bonds and invest in other instruments - Apppreciate if you do a presentation on Buying and Selling Bonds
Very timely, useful and informative as usual.
Could you elaborate on the Expense Ratios for these funds. This is what I found out when I called both Fidelity and Vanguard. Fidelity says their 7-day yield is "net" of the expense ratio. When I called Vanguard, they said their 7-day yield is NOT net of the expense ratio. So even though Vanguard offers a higher 7-day yield than Fidelty, Vanguard's quoted 7-day yield does not account for subtracting out the expense ratio. Can you confirm that is what you also found out.
I'd suggest calling Vanguard again & speaking with another rep - that is not the correct way to calculate the SEC yield
Thanks to you Jen! Another Avenue for us savers. Have used your advice for several savings opportunities, am retired and have fixed income. After last year stock losses was not inclined to put more savings at risk. Your suggestions have helped make up for last years losses. Grateful for you
@@bizzzzzzle Which company - Fidelity of Vanguard that doesn't know what they are talking about?
You. Are. Phenomenal. Answered every question I had in depth about MM including how they are insured. You really should be selling these videos!! Take my money! I can't imagine how much you've saved me already!! Grateful!
Thank you, Jenn. Very helpful. You now have a new subscriber.
That was a fantastic breakdown. You know your stuff :)
Very helpful! But wow, the number of ads is ridiculous.
Love you Jen! I just started looking into money market fund in the last two weeks, and you video came right in time! Such a concise video loaded with so much useful information! A question, those money market funds carried by the large brokerages like Vanguard, Fidelity and Schwab, do not have transaction fees and short-term redemption fees, correct? Basically I am trying to figure out if I use any of them to park money temporarily, would I have flexibility selling them into cash anytime?
Seems like T bills make more sense than money market funds. Less risk and similar if not more interest earned.
That's what I'm doing. I've been staying with the 17 wk which has been going up.
I think so too, but Fidelity automatically park your cash in money mkt fund until you decide how to proceed. I don't like that, because it's risky.
To different purposes. The MM is like a liquid holding account at your broker. Where you're parking your cash and can use it anytime to buy stocks or CD's or send it to your bank if you need cash. The t-bill is not liquid for the term of the bond. So even though the t-bill might pay a little higher the liquidity of the MM is a fair trade off for your ability to make a quick kill if something presents itself.
As an example suppose you have $100000 in 17 week maturity t-bill and it's the ninth week and Bill Gates get speared while visiting Kenya. As an emotional reaction Microsoft stock crashes to $100 but recovers in a couple of days. If you had $100000 in your Money Market fund you could now be holding 1000 share of MS.🤪
Yes. Only advantage to MM is they are more liquid
Awesome video. Straightforward and informative 🎉. Thank you, I’ve subscribed.
Thank you for this simple clear information.
oh is that what this was? I had my cash sitting my fidelity account and surprisingly had $600 sitting there after a week.
Wonderful presentation and valuable information. Thanks for putting this video together. I’m a new subscriber.
Thank you Jen. Another great video.
You are an awesome teacher!
Great content! Even as an experienced investor I learned a great deal. Subscribed!
Very high quality content. Thank you.
3 to 6 months of Treasury bills are good place to park emergency money as the market is liquid and you can sell them with a slight profit in current conditions if there is an emergency. CDs on the other hand is not a good place to park emergency money as the trading is thin and you don't get a good price. I have actively sold some Treasury bills to rebalance the laddering in retirement accounts. If done so in taxable accounts, I think the sales will be taxed as equity gains and not State tax free dividends.
I got sick of chasing high-yield savings accounts and their various quirks and limits. The money market funds are pretty good right now.
Keeping mine liquid in VMFXX at Vanguard. 4.93% as of 5/8. Hate Vanguard, love their money market funds. Government MMF but higher than Fidelity’s prime MMF.
Always learning something here. Thanks
One of the options in my employer's 401k is called the Key Guaranteed Portfolio Fund. It doesn't describe itself as a money market, but apparently, it invests in investment grade short-term bonds across a range of asset-backed securities. It seems to function like a money-market fund in that it aims to maintain a stable value, but it does not list a net asset value or past performance.
I have my 401k at Vanguard in a similar fund, specifically for our firm. It's my cash bucket and I use it to pay annual IRS taxes as I draw it down monthly. Earns a little over 2% and that's OK with me.
So this means its an actual liquid fund where you can withdraw on demand, say, to stash your 6-12 month emergency funds? I've never heard of this concept, and I'm wondering if I can pass the info onto the powers-that-be at UPS
@@beachfrontgargoyl You have to be retired and/or aged 59 1/2 to avoid IRS 10% penalty. It's in a 401k plan.
I'm sure you know this already but PNCs High Yield Saving was just raised to 4.30% but if I remember that is one of the banks that is on the watch list.
Thanks for the info!
Thank you very much for your explanation!
Thank you so much for clarification ❤I spoke with Fidelity representative and we also can just park money in cash there if I have concerns about Money mkt funds.
I'm trying to decide what would be safer, bc Spaxx could lose money, and we don't want that.
Spaxx could lose money but very unlikely. Giving up yield is a sure way to lose money. You should consider a treasury money market fund, especially if you are in a high-tax state.
@@glgermain They told people the same about Lehman brothers, that it's very unlikely to collapse
@@Juli-ch8sd No Julia, it's not the same at all. Lehman brothers collapsed because it was an investment bank that made risky investments as a principle party. Fidelity is not an investment bank and does not make its own investments. It is primarily a record keeping company that manages other people's trust funds. Lehman's brokerage and fund clients didn't lose anything. The losses were incurred by people who engaged in transactions in which Lehman was a party, and the shareholders and creditors of Lehman itself. I don't know what it means to "park money in cash" at Fidelity. If it's in a fund, then you should be safe. If it's in a bank account then you should be safe up to FDIC limits. If you're lending Fidelity money then you're a creditor and have risk.
I've had Fidelity's MM for 38 years without a worry.
I think right now if you put money i the FDIC deposit sweep at Fidelity, it actually has a lower yield than a lot of HYSAs. If you are going to use Fidelity for parking cash, I'd personally go with MMF.
Always look forward to your next video, learning so much from your knowledge. Thank you !!!
Hmmm, money market fund pays dividends while t bills pays interest. Tax treatment differs. sounds something to think about
What about a ultra short term ETF such as SGOV? How does this fit into the discussion? Is this a good option for emergency fund? Is it safe? Thanks!
It's not safe from changes in short term interest rates because it doesn't try to maintain a $1 share value. Is it worth the extra interest rate risk for the additional yield?
I found vanguard's treasury money market lowest fee and high rate. Plus isn't upwards of 100% of distributions only taxed federally like the treasury products it uses?
You're awesome. Thank you for sharing this info!
So educational, thank you
Thanks!
Glad you enjoyed the video Anne!
Great info in one place !!
Thanks 🙏