Which Vanguard MMF?

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J_Markov
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Which Vanguard MMF?

Post by J_Markov » Mon Dec 04, 2017 9:27 am

I have all my taxable accounts in Vanguard. Currently I'm trying to set some money aside every month and keep in liquid/cash, so thinking of using one of Vanguard MMFs. This is money that I could be using in the next 6-9 months (may or may not use it, so don't want to risk it on stocks). My question is, which MMF should I use? There are multiple money market funds in Vanguard so trying to decide which one is the adequate. I've seen the prime money market fund, tax-exempt money market fund, federal money market fund and treasury money market fund. I live a state with no state income tax, if that helps. Any advice appreciated.

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dm200
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Re: Which Vanguard MMF?

Post by dm200 » Mon Dec 04, 2017 9:30 am

J_Markov wrote:
Mon Dec 04, 2017 9:27 am
I have all my taxable accounts in Vanguard. Currently I'm trying to set some money aside every month and keep in liquid/cash, so thinking of using one of Vanguard MMFs. This is money that I could be using in the next 6-9 months (may or may not use it, so don't want to risk it on stocks). My question is, which MMF should I use? There are multiple money market funds in Vanguard so trying to decide which one is the adequate. I've seen the prime money market fund, tax-exempt money market fund, federal money market fund and treasury money market fund. I live a state with no state income tax, if that helps. Any advice appreciated.
I think the Prime MM would be better for you than the Federal or Treasury MM because it pays a higher yield.

beardsworth
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Re: Which Vanguard MMF?

Post by beardsworth » Mon Dec 04, 2017 10:38 am

dm200 wrote:
Mon Dec 04, 2017 9:30 am
I think the Prime MM would be better for you than the Federal or Treasury MM because it pays a higher yield.
That is, in my opinion, not the sole factor in choosing whether to use Prime Money Market.

Under the SEC alteration of money market fund operating rules, funds are generally classified as "government" or "retail."

Vanguard's prospectus for Prime Money Market states the following:

"Vanguard has designated Vanguard Prime Money Market Fund as a retail money market fund.

Retail money market funds are defined as prime or tax-exempt money market funds that have policies and procedures reasonably designed to limit all beneficial owners of such money market funds to natural persons. Retail money market funds are permitted to continue to maintain a stable NAV through the use of amortized cost accounting. If a retail money market fund’s weekly assets fall below a certain threshold, retail money market funds are subject to fees and gates.

There are two types of liquidity fees: discretionary liquidity fees and default liquidity fees.

Discretionary liquidity fee. The Fund may impose a liquidity fee of up to 2% on all redemptions in the event that the Fund’s weekly liquid assets fall below 30% of its total assets if the Board determines that it is in the best interest of the Fund. Once the Fund has restored its weekly liquidity assets to 30% of total assets, any liquidity fee must be suspended.

Default liquidity fee. The Fund is required to impose a liquidity fee of 1% on all redemptions in the event that the Fund’s weekly liquid assets fall below 10% of its total assets unless the Fund’s Board determines that (1) the fee is not in the best interest of the Fund or (2) a lesser/higher fee (up to 2%) is in the best interest of the Fund.

In addition to, or in lieu of, the liquidity fee, the Fund is permitted to implement temporarily a redemption gate (i.e., suspend redemptions) if the Fund’s weekly liquid assets fall below 30% of its total assets. The gate could remain in effect for no longer than 10 days in any 90-day period. Once the Fund has restored its weekly liquidity assets to 30% of total assets, the gate must be lifted. If you redeem shares when the Fund has imposed a liquidity fee, then the amount you receive for your redemption will be reduced by the amount of the liquidity fee and will generally cause you to recognize a loss for tax purposes equal to the amount of that fee. Once the Fund imposes a redemption gate, then unprocessed orders to redeem will be canceled and the Fund will not accept redemption orders until the gate is no longer in effect. If you still wish to redeem once the gate is lifted, you will need to submit a new redemption request to the Fund or your financial intermediary."


As "government" money funds, Vanguard Federal and Vanguard Treasury are not subject to these restrictions and fees.

The OP will, of course, have to decide whether the little bit of extra yield on Prime, or any other non-"government" money fund, is worth being subject to these additional rules. My personal decision is that it is not, because just about the last thing I want from any money market fund is extra fees, or restrictions on withdrawals, or a greater possibility of a non-$1 share price. I can "get" all of those things, if I want them, from other kinds of mutual funds. :)

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dm200
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Re: Which Vanguard MMF?

Post by dm200 » Mon Dec 04, 2017 10:48 am

That is, in my opinion, not the sole factor in choosing whether to use Prime Money Market.
No, not the "sole factor", of course.

I believe the risks, today, of holding Prime MM in this case are near zero.

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ruralavalon
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Re: Which Vanguard MMF?

Post by ruralavalon » Mon Dec 04, 2017 12:20 pm

dm200 wrote:
Mon Dec 04, 2017 10:48 am
That is, in my opinion, not the sole factor in choosing whether to use Prime Money Market.
No, not the "sole factor", of course.

I believe the risks, today, of holding Prime MM in this case are near zero.
I would also suggest Vanguard Prime Money Market Fund (VMMXX).
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J_Markov
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Re: Which Vanguard MMF?

Post by J_Markov » Mon Dec 04, 2017 12:34 pm

Thank you for the replies. So it seems that the main difference between the 'retail' and the 'government' MMFs, aside from the different yields, is the 'level of risk'. So within the retail funds, the tax-exempt would make more sense than the prime? Regarding the government funds, what's the difference between the federal and the treasury? Thanks. Again, just trying to park my money for sometime.

beardsworth
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Re: Which Vanguard MMF?

Post by beardsworth » Mon Dec 04, 2017 1:46 pm

J_Markov wrote:
Mon Dec 04, 2017 12:34 pm
Regarding the government funds, what's the difference between the federal and the treasury?
Said respectfully . . .

Your original post said that you had "seen" these funds, but it's not clear whether that means only that you're aware of their existence, or that you've actually done any of your own research about them (as opposed to asking people here to give you the information).

Each of these funds has a prospectus, where you can read Vanguard's own description of it, and an updated fund report issued twice a year, where you can view the actual portfolio of holdings.

Note that Prime, Federal, and Treasury often appear together in the same document.

Vanguard mutual fund prospectuses:

https://personal.vanguard.com/us/litful ... ortBy=type

Vanguard mutual fund reports:

https://personal.vanguard.com/us/litful ... ortBy=type

J_Markov
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Re: Which Vanguard MMF?

Post by J_Markov » Mon Dec 04, 2017 4:28 pm

beardsworth wrote:
Mon Dec 04, 2017 1:46 pm
J_Markov wrote:
Mon Dec 04, 2017 12:34 pm
Regarding the government funds, what's the difference between the federal and the treasury?
Said respectfully . . .

Your original post said that you had "seen" these funds, but it's not clear whether that means only that you're aware of their existence, or that you've actually done any of your own research about them (as opposed to asking people here to give you the information).

Each of these funds has a prospectus, where you can read Vanguard's own description of it, and an updated fund report issued twice a year, where you can view the actual portfolio of holdings.

Note that Prime, Federal, and Treasury often appear together in the same document.

Vanguard mutual fund prospectuses:

https://personal.vanguard.com/us/litful ... ortBy=type

Vanguard mutual fund reports:

https://personal.vanguard.com/us/litful ... ortBy=type
Thank you, very helpful

mega317
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Re: Which Vanguard MMF?

Post by mega317 » Mon Dec 04, 2017 4:41 pm

If you're in the 33% bracket or above, the municipal fund might make more sense.

sport
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Re: Which Vanguard MMF?

Post by sport » Mon Dec 04, 2017 9:43 pm

The Vanguard Treasury MM fund has a minimum initial investment of $50,000. Perhaps that will help you narrow your options.

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aj76er
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Re: Which Vanguard MMF?

Post by aj76er » Tue Dec 05, 2017 11:22 am

You could also link an FDIC insured Ally high-yield savings account directly to Vanguard brokerage. When using mutual funds, you can make same day buy's and sell's directly from/to an external account. I believe Ally savings is currently paying >1.2% yield, so pretty competitive with MMF
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avenger
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Re: Which Vanguard MMF?

Post by avenger » Sun Dec 10, 2017 6:14 am

In my brokerage account, I just use the Vanguard Federal Money Market Fund (Settlement fund). It's the fund all of my cash sloshes into and out of.
cheers ... -Mark | "Our life is frittered away with detail. Simplify. Simplify." -Henry David Thoreau | [3 fund portfolio: VTI, VXUS, SV fund (yield 3.01%)]

stevekozak2
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Re: Which Vanguard MMF?

Post by stevekozak2 » Sun Dec 10, 2017 8:22 am

aj76er wrote:
Tue Dec 05, 2017 11:22 am
You could also link an FDIC insured Ally high-yield savings account directly to Vanguard brokerage. When using mutual funds, you can make same day buy's and sell's directly from/to an external account. I believe Ally savings is currently paying >1.2% yield, so pretty competitive with MMF
This was my thinking also. 1.25% to keep cash is a good deal right now.

mggray17
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Re: Which Vanguard MMF?

Post by mggray17 » Sun Dec 10, 2017 8:36 am

Also, Ally 1.6% 11 month no risk CD, no EW penalty after 7 days.

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