Best options for cash in Schwab brokerage accounts?

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MnD
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Best options for cash in Schwab brokerage accounts?

Post by MnD » Sat Feb 10, 2018 11:09 am

I don't keep much cash in Schwab accounts, but also don't walk past $1's, $5's and $10's lying in the street.
Both the Bank sweep and Schwab One sweep interest rates are awful at 0.12%.

Schwab Purchased Money Market funds with no minimum balance include:
Schwab Value Advantage Money Fund SWVXX 1.30%
Schwab Government Money Fund SNVXX 0.97%
Schwab Municipal Money Fund SWTXX 0.74%

Anything I'm missing? I have a high yielding on-line savings account elsewhere, so just focusing on relatively small cash levels at Schwab.

Nate79
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Re: Best options for cash in Schwab brokerage accounts?

Post by Nate79 » Sat Feb 10, 2018 12:03 pm

I'm interested in this question as well.

onourway
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Re: Best options for cash in Schwab brokerage accounts?

Post by onourway » Sat Feb 10, 2018 12:32 pm

SWVXX is the best I am aware of. It pretty much trails the Vanguard Prime account by the difference in their expense ratios. 0.41% is a big chunk from a MM fund!

Jack FFR1846
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Re: Best options for cash in Schwab brokerage accounts?

Post by Jack FFR1846 » Sat Feb 10, 2018 12:43 pm

Transfers into and out of Schwab are faster than anyplace I'm aware of. If I transfer today, it's at it's destination the next day. So what I do is buy the ETFs I want (Friday, I bought $5k of SCHB), then transfer the remaining back to Ablebanking's 1.7% savings account.

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dbr
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Re: Best options for cash in Schwab brokerage accounts?

Post by dbr » Sat Feb 10, 2018 12:47 pm

The best option for cash is to invest it in something else that offers better return. Why are you asking this?

Another really good option is to take out the money and spend it.

SlowMovingInvestor
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Re: Best options for cash in Schwab brokerage accounts?

Post by SlowMovingInvestor » Sat Feb 10, 2018 1:11 pm

dbr wrote:
Sat Feb 10, 2018 12:47 pm
The best option for cash is to invest it in something else that offers better return. Why are you asking this?
There are reasons why you might want to leave cash at a brokerage (rather than transferring to a bank). Meeting account balance limits for bonuses is a good example.

Alan S.
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Re: Best options for cash in Schwab brokerage accounts?

Post by Alan S. » Sat Feb 10, 2018 1:25 pm

I have moved all cash out of these sweep funds to Val Adv.

FDIC insurance on bank sweep funds and not breaking the buck are not worth taking the interest rate hit, short of true crisis conditions. But MM reform is definitely a little inconvenient, making all purchases and sales into a two step process.

I imagine that active traders are not happy, since they are likely forced into heavy use of these low yielding sweep funds.

dbr
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Re: Best options for cash in Schwab brokerage accounts?

Post by dbr » Sat Feb 10, 2018 1:28 pm

SlowMovingInvestor wrote:
Sat Feb 10, 2018 1:11 pm
dbr wrote:
Sat Feb 10, 2018 12:47 pm
The best option for cash is to invest it in something else that offers better return. Why are you asking this?
There are reasons why you might want to leave cash at a brokerage (rather than transferring to a bank). Meeting account balance limits for bonuses is a good example.
Well, in that case a person would do whatever makes the most sense to keep the bonus, which would presumably include the possibility of investing in something.

MnD
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Re: Best options for cash in Schwab brokerage accounts?

Post by MnD » Sun Feb 11, 2018 9:19 am

onourway wrote:
Sat Feb 10, 2018 12:32 pm
SWVXX is the best I am aware of. It pretty much trails the Vanguard Prime account by the difference in their expense ratios. 0.41% is a big chunk from a MM fund!
Currently waived lower to net .35% "for so long as the investment adviser (Charles Schwab Investment Management Inc.) serves as the adviser to the fund". But yes, that's 19 basis points more than VMMXX at .16%, and accounts for the difference in yield.
http://hosted.rightprospectus.com/SF/Fu ... =808515605

rixer
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Re: Best options for cash in Schwab brokerage accounts?

Post by rixer » Sun Feb 11, 2018 10:08 am

When I have small amounts of cash sitting in there, I just put it in the Schwab total stock index fund. It's not usually enough to throw off my AA.

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BigFoot48
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Re: Best options for cash in Schwab brokerage accounts?

Post by BigFoot48 » Mon Mar 05, 2018 12:27 pm

In February Schwab changed the vehicle the cash in my brokerage and IRA accounts are automatically invested in from Schwab Cash Reserves Sweep to the FDIC-insured Bank Sweep. (They had sent me two letters saying this was coming.)

The result is that cash is now earning 0.12% vs. the 0.88% it previously earned. This has gotten my attention as to keeping the cash balance at a reasonable amount to fund monthly expenses, and to decide which fund to keep cash not needed for months invested in. Based in this thread and others it appears that Schwab Value Advantage Money Fund - Investor Shares SWVXX, currently earning 1.36%, is the way to go.

Any comments on this?
Last edited by BigFoot48 on Mon Mar 05, 2018 3:17 pm, edited 1 time in total.
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Nate79
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Re: Best options for cash in Schwab brokerage accounts?

Post by Nate79 » Mon Mar 05, 2018 12:51 pm

BigFoot48 wrote:
Mon Mar 05, 2018 12:27 pm
In February Schwab changed the vehicle the cash in my brokerage and IRA accounts are automatically invested in from Schwab Cash Reserves Sweep to the FDIC-insured Bank Sweep. (They had sent me two letters saying this was coming.)

The result is that cash is now earning 0.12% vs. the 0.88% it previously earned. This has gotten my attention as to keeping the cash balance at a reasonable amount to fund monthly expenses, and to decide which fund to keep cash not needed for months invested in. Based on this thread and others it appears that Schwab Value Advantage Money Fund - Investor Shares SWVXX currently earning 1.36% is the way to go.

Any comments on this?
After this thread started I started using SWVXX for extra cash in my Schwab brokerage accounts. Seems like a fine choice to me.

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F150HD
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Re: Best options for cash in Schwab brokerage accounts?

Post by F150HD » Mon Mar 05, 2018 12:55 pm

One frustration I have with Schwab is that excess cash isn't automatically put into a 'sweep account', you have to literally put in a purchase order to move your cash into SWVXX for example (they treat it like buying a 'mutual fund'). Maybe this is a standard I've never seen? but anywhere else I have accounts, excess cash is automatically put into a sweep account to earn interest etc. you don't have to manually put in a "Buy" order as you would purchasing a stock or fund.

Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.

Maybe someone more in the know then I can comment on this? Thanks.

Nate79
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Re: Best options for cash in Schwab brokerage accounts?

Post by Nate79 » Mon Mar 05, 2018 2:25 pm

F150HD wrote:
Mon Mar 05, 2018 12:55 pm
One frustration I have with Schwab is that excess cash isn't automatically put into a 'sweep account', you have to literally put in a purchase order to move your cash into SWVXX for example (they treat it like buying a 'mutual fund'). Maybe this is a standard I've never seen? but anywhere else I have accounts, excess cash is automatically put into a sweep account to earn interest etc. you don't have to manually put in a "Buy" order as you would purchasing a stock or fund.

Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.

Maybe someone more in the know then I can comment on this? Thanks.
Here is Schwab's summary page for sweep accounts.
https://client.schwab.com/secure/cc/pro ... t_services

Uninvested cash is swept automatically into FDIC insured accounts earning 0.12% - 0.30% APY.

If you want to take the cash and invest in something that earns more then yes, you need to purchase the mutual fund like SWVXX. I don't think you can have this done automatically.

They do have sweep accounts that can go into higher earning options but this appears to be only for specific types of accounts:
https://client.schwab.com/secure/cc/pro ... t_services

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BigFoot48
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Re: Best options for cash in Schwab brokerage accounts?

Post by BigFoot48 » Mon Mar 05, 2018 2:58 pm

F150HD wrote:
Mon Mar 05, 2018 12:55 pm
One frustration I have with Schwab is that excess cash isn't automatically put into a 'sweep account', you have to literally put in a purchase order to move your cash into SWVXX for example (they treat it like buying a 'mutual fund').
Yes, that is the annoyance that comes with this change. For about $120 extra earnings a year on a $10,000 cash balance kept in SWVXX vs. Reserves Sweep one would have to decide how often they want to optimize the balances in both.

Don't we all miss the days of high Money Market returns?
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123
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Re: Best options for cash in Schwab brokerage accounts?

Post by 123 » Mon Mar 05, 2018 3:04 pm

F150HD wrote:
Mon Mar 05, 2018 12:55 pm
One frustration I have with Schwab is that excess cash isn't automatically put into a 'sweep account', you have to literally put in a purchase order to move your cash into SWVXX for example (they treat it like buying a 'mutual fund'). Maybe this is a standard I've never seen? but anywhere else I have accounts, excess cash is automatically put into a sweep account to earn interest etc. you don't have to manually put in a "Buy" order as you would purchasing a stock or fund.

Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.

Maybe someone more in the know then I can comment on this? Thanks.
+1 I share you grief over such a simple thing as a default "sweep account". As much as I like Schwab and have used them for over 30 years the way they have mangled the handling of account cash balances over the last 5 (?) years is shameful. Used to be you had a default MMF and all was good. Then I think they wanted to bump-up deposits at Schwab Bank so they swept cash balances there and paid account owners a much lower interest rate. If you want to perserver you can purchase MMF shares. It does nothing to make investing easier, which is supposed to be what Schwab is about. Last year when we had a windfall we did not put it under the Schwab umbrella.
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lack_ey
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Re: Best options for cash in Schwab brokerage accounts?

Post by lack_ey » Mon Mar 05, 2018 3:09 pm

F150HD wrote:
Mon Mar 05, 2018 12:55 pm
Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.
The purchased money market funds trade like mutual funds but with T+1 settlement date, so there's no delay to do what you say.

If you want to sell the money market fund to purchase something else, you can do both transactions on the same day and you will be fine. The money market fund settlement will be the next business day and the other asset probably the next business day after that (stocks, ETFs, most mutual funds are T+2, previously T+3).

However, if you want to sell something else to buy the money market fund, you'd have to wait a day for the buy order on the T+1 asset. If you do both on the same day, the T+1 settlement (the buy) will come first, and there won't be money to cover that transaction.

You could also use T-bills, which settle T+1. SWVXX has a 7-day yield of 1.36%. There are for example 3-month T-bills around 1.65%. Even if the money market yield creeps up the next few months, it's unlikely to beat the T-bill, though of course the latter has some very mild price volatility and nonzero but very small spreads if you actually need to sell early.

In general that is not going to matter much unless you're sitting on a lot of cash for some reason, like for a large expense in the near future. For longer-term needs, some bond fund is probably better.

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F150HD
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Re: Best options for cash in Schwab brokerage accounts?

Post by F150HD » Mon Mar 05, 2018 7:22 pm

Nate79 wrote:
Mon Mar 05, 2018 2:25 pm
F150HD wrote:
Mon Mar 05, 2018 12:55 pm
One frustration I have with Schwab is that excess cash isn't automatically put into a 'sweep account', you have to literally put in a purchase order to move your cash into SWVXX for example (they treat it like buying a 'mutual fund'). Maybe this is a standard I've never seen? but anywhere else I have accounts, excess cash is automatically put into a sweep account to earn interest etc. you don't have to manually put in a "Buy" order as you would purchasing a stock or fund.

Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.

Maybe someone more in the know then I can comment on this? Thanks.
Here is Schwab's summary page for sweep accounts.
https://client.schwab.com/secure/cc/pro ... t_services

Uninvested cash is swept automatically into FDIC insured accounts earning 0.12% - 0.30% APY.

If you want to take the cash and invest in something that earns more then yes, you need to purchase the mutual fund like SWVXX. I don't think you can have this done automatically.

They do have sweep accounts that can go into higher earning options but this appears to be only for specific types of accounts:
https://client.schwab.com/secure/cc/pro ... t_services
Thanks. A phone rep gave me a looooooong story about this a month back when I called for something, it left me confused lol...anyway, I don't trade there much and still am not exceptionally fluent w/ their site. But their customer service is really nice thats for sure. (Fidelity too)

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F150HD
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Re: Best options for cash in Schwab brokerage accounts?

Post by F150HD » Mon Mar 05, 2018 7:36 pm

123 wrote:
Mon Mar 05, 2018 3:04 pm
F150HD wrote:
Mon Mar 05, 2018 12:55 pm
One frustration I have with Schwab is that excess cash isn't automatically put into a 'sweep account', you have to literally put in a purchase order to move your cash into SWVXX for example (they treat it like buying a 'mutual fund'). Maybe this is a standard I've never seen? but anywhere else I have accounts, excess cash is automatically put into a sweep account to earn interest etc. you don't have to manually put in a "Buy" order as you would purchasing a stock or fund.

Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.

Maybe someone more in the know then I can comment on this? Thanks.
+1 I share you grief over such a simple thing as a default "sweep account". As much as I like Schwab and have used them for over 30 years the way they have mangled the handling of account cash balances over the last 5 (?) years is shameful. Used to be you had a default MMF and all was good. Then I think they wanted to bump-up deposits at Schwab Bank so they swept cash balances there and paid account owners a much lower interest rate. If you want to perserver you can purchase MMF shares. It does nothing to make investing easier, which is supposed to be what Schwab is about. Last year when we had a windfall we did not put it under the Schwab umbrella.
That nails it right there. Thanks for the info.

Yea there's something going on there I've struggled with since opening an account last summer (all for a bonus). kinda wish I'd have skipped the bonus! lol.... I find navigating their site and trade tickets cumbersome.

Simple things I struggle with on their site- like the image below. It completely eludes me how that search returns nothing on their site.

Image

MMF expense ratio is worth noting too....(unless this level is normal?)

Image

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F150HD
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Re: Best options for cash in Schwab brokerage accounts?

Post by F150HD » Mon Mar 05, 2018 7:39 pm

lack_ey wrote:
Mon Mar 05, 2018 3:09 pm
F150HD wrote:
Mon Mar 05, 2018 12:55 pm
Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.
The purchased money market funds trade like mutual funds but with T+1 settlement date, so there's no delay to do what you say.

If you want to sell the money market fund to purchase something else, you can do both transactions on the same day and you will be fine. The money market fund settlement will be the next business day and the other asset probably the next business day after that (stocks, ETFs, most mutual funds are T+2, previously T+3).

However, if you want to sell something else to buy the money market fund, you'd have to wait a day for the buy order on the T+1 asset. If you do both on the same day, the T+1 settlement (the buy) will come first, and there won't be money to cover that transaction.

You could also use T-bills, which settle T+1. SWVXX has a 7-day yield of 1.36%. There are for example 3-month T-bills around 1.65%. Even if the money market yield creeps up the next few months, it's unlikely to beat the T-bill, though of course the latter has some very mild price volatility and nonzero but very small spreads if you actually need to sell early.

In general that is not going to matter much unless you're sitting on a lot of cash for some reason, like for a large expense in the near future. For longer-term needs, some bond fund is probably better.
Thank you!

Nate79
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Re: Best options for cash in Schwab brokerage accounts?

Post by Nate79 » Mon Mar 05, 2018 8:02 pm

SWVXX:
https://www.schwabfunds.com/public/csim ... mbol=SWVXX

For some reason it is difficult to find this page thru Schwab's website but Google finds it.

onourway
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Re: Best options for cash in Schwab brokerage accounts?

Post by onourway » Mon Mar 05, 2018 8:39 pm

Schwab's search is truly useless. Just have to use Google to find anything on their site.

As a new Schwab customer I'm finding their sweep account option frustrating as well. I'm manually moving funds into SWVXX as others here, but it'd be much better if that could be done automatically.

stlutz
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Re: Best options for cash in Schwab brokerage accounts?

Post by stlutz » Mon Mar 05, 2018 8:52 pm

The purchased money market funds trade like mutual funds but with T+1 settlement date, so there's no delay to do what you say.
Actually, they settle the same day. So, if I sell one today before market close, one can move the money elsewhere the following day.

Doesn't mean that their approach to the issue is not inferior to Fidelity or Vanguard.

arf30
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Re: Best options for cash in Schwab brokerage accounts?

Post by arf30 » Sat Apr 21, 2018 5:04 pm

I've been going back and forth between replacing my traditional checking account with either a Schwab brokerage account or a Fidelity brokerage account, and noticed that the main difference is Fidelity still uses SPAXX (Gov Money Market fund, 1.25% yield) as the core position. Schwab does not, as people have noted - you have to manually buy and sell SWVXX, and leave enough in the "cash" position (.15%) to cover bills and transfers.

togb
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Re: Best options for cash in Schwab brokerage accounts?

Post by togb » Mon Apr 23, 2018 8:59 am

thanks for raising this. I've had more cash than usual sort of sitting there, in case of a major correction that looked like a buying opportunity. This thread brought some focus for me-- I can do better with that cash. I did put some cash in Vanguards short term corporate bond EFT, as a money market substitute. It yields a whopping 2% but it seems like a safe place to park some money, low volatility, easy to liquidate if I need to and at least 2% is "something".

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Re: Best options for cash in Schwab brokerage accounts?

Post by an_asker » Mon Apr 23, 2018 2:23 pm

Following the thread :-)

MnD
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Re: Best options for cash in Schwab brokerage accounts?

Post by MnD » Mon Apr 23, 2018 3:11 pm

Schwab Municipal Money Fund SWTXX is 1.44%.
In my tax bracket that's the best MM option at Schwab I can find.
https://www.schwab.com/public/schwab/in ... oney_funds

midagelawyer
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Re: Best options for cash in Schwab brokerage accounts?

Post by midagelawyer » Tue May 08, 2018 12:19 pm

I'm having trouble understanding how the Schwab New York Municipal Money Fund had a 7-day yield of over 1% as of 3/31/2018 (today it is 1.3%) and has never, not once, ever, returned an actual annual yield above 0.56% since 2009 and is still valued at $1 per share. For all of 2011-2015, it looks like it returned 2 bps per year. Have NY muni rates risen that much since those days? Just want to make sure I'm not missing something big here because, as we all know, yield is great, but total return is what I'm after.

Thanks,

Nate79
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Re: Best options for cash in Schwab brokerage accounts?

Post by Nate79 » Tue May 08, 2018 2:50 pm

midagelawyer wrote:
Tue May 08, 2018 12:19 pm
I'm having trouble understanding how the Schwab New York Municipal Money Fund had a 7-day yield of over 1% as of 3/31/2018 (today it is 1.3%) and has never, not once, ever, returned an actual annual yield above 0.56% since 2009 and is still valued at $1 per share. For all of 2011-2015, it looks like it returned 2 bps per year. Have NY muni rates risen that much since those days? Just want to make sure I'm not missing something big here because, as we all know, yield is great, but total return is what I'm after.

Thanks,
If you click on the below link and then click on the pdf file for the NY muni fund that you are talking about it will give you the annual returns going back the last 10 years:
https://www.schwab.com/public/schwab/in ... oney_funds

In deed from about 2010 until about 2015 the returns were about zero each year. This is true for this fund as well as other money market funds such as Vanguard's Prime Money Market fund:
https://personal.vanguard.com/us/funds/ ... true#tab=0

Rates really started to increase in 2016 and 2017 to get us where we are today.

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Re: Best options for cash in Schwab brokerage accounts?

Post by midagelawyer » Tue May 08, 2018 4:47 pm

Thanks. Just for completeness, does this mean that the 7-day yields for those years where total return was close to zero, were also close to zero?

dbr
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Re: Best options for cash in Schwab brokerage accounts?

Post by dbr » Tue May 08, 2018 4:50 pm

midagelawyer wrote:
Tue May 08, 2018 4:47 pm
Thanks. Just for completeness, does this mean that the 7-day yields for those years where total return was close to zero, were also close to zero?
A money fund has fixed NAV so the yield is the return. That is the actual distribution yield is the return. Distribution yield is history. 7-day is forward looking. For short term fixed income, I am assuming the two are almost exactly the same.

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F150HD
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Re: Best options for cash in Schwab brokerage accounts?

Post by F150HD » Tue May 08, 2018 5:14 pm

onourway wrote:
Mon Mar 05, 2018 8:39 pm
Schwab's search is truly useless. Just have to use Google to find anything on their site.

As a new Schwab customer I'm finding their sweep account option frustrating as well. I'm manually moving funds into SWVXX as others here, but it'd be much better if that could be done automatically.

Nate79 wrote:
Mon Mar 05, 2018 8:02 pm
SWVXX:
https://www.schwabfunds.com/public/csim ... mbol=SWVXX

For some reason it is difficult to find this page thru Schwab's website but Google finds it.

So its not just me.

I find searching their site frustrating...full of big pointless pictures (guy drinking coffee in his living room etc), circular links....7 clicks later and I think I've found what I've wanted. 1-2 page long tiny font disclaimers stating this and that....

Seems to me like its very design is to get you to 'hire' them to do it for you.

Cust Serv is great when I call....but at that, the site is so bad I am looking at moving my funds out.

Maybe I'm more used to a trading site (Fidelity etc) where you can find data you need easier and quicker? Dunno.

Took me awhile to find out that you need to actually set up a 'trade' using their trade ticket to move excess cash into a money market account.

Also...take note of the expense ratios on their money market funds.

Hate to be so negative about it, but, the site is frustrating and has been ever since I opened an account there.
Last edited by F150HD on Tue May 08, 2018 5:19 pm, edited 1 time in total.

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Re: Best options for cash in Schwab brokerage accounts?

Post by Artsdoctor » Tue May 08, 2018 5:18 pm

123 wrote:
Mon Mar 05, 2018 3:04 pm
F150HD wrote:
Mon Mar 05, 2018 12:55 pm
One frustration I have with Schwab is that excess cash isn't automatically put into a 'sweep account', you have to literally put in a purchase order to move your cash into SWVXX for example (they treat it like buying a 'mutual fund'). Maybe this is a standard I've never seen? but anywhere else I have accounts, excess cash is automatically put into a sweep account to earn interest etc. you don't have to manually put in a "Buy" order as you would purchasing a stock or fund.

Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.

Maybe someone more in the know then I can comment on this? Thanks.
+1 I share you grief over such a simple thing as a default "sweep account". As much as I like Schwab and have used them for over 30 years the way they have mangled the handling of account cash balances over the last 5 (?) years is shameful. Used to be you had a default MMF and all was good. Then I think they wanted to bump-up deposits at Schwab Bank so they swept cash balances there and paid account owners a much lower interest rate. If you want to perserver you can purchase MMF shares. It does nothing to make investing easier, which is supposed to be what Schwab is about. Last year when we had a windfall we did not put it under the Schwab umbrella.
123,

This is not a Schwab issue. The SEC has forced all brokerage houses to do this, and the regulations have been in effect since at least 2016. During the 2008-2009 financial crisis, there was a concern about frozen money market accounts as well as "breaking the buck." Ultimately, the SEC put safeguards in place to make "cash accounts" liquid and that ultimately led to federal government securities making up the bulk of the funds. There are relatively complex rules pertaining to fees and gates, but the end result was having settlement funds fully liquid and containing "safe" government securities. Of course, this resulted in much smaller yields.

Most places, like Schwab, Fidelity, and Vanguard, will have multiple money market funds. However, they are not permitted to use these funds as settlement funds because of SEC regulations. This is why you cannot use your Schwab Advantage Account as the settlement fund--you must buy it.

No one is happy with this but it is the law of the land.

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Re: Best options for cash in Schwab brokerage accounts?

Post by kenoryan » Tue May 08, 2018 5:27 pm

Swoxx
Swsxx
Vwitx

Nate79
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Re: Best options for cash in Schwab brokerage accounts?

Post by Nate79 » Tue May 08, 2018 5:56 pm

Artsdoctor wrote:
Tue May 08, 2018 5:18 pm
123 wrote:
Mon Mar 05, 2018 3:04 pm
F150HD wrote:
Mon Mar 05, 2018 12:55 pm
One frustration I have with Schwab is that excess cash isn't automatically put into a 'sweep account', you have to literally put in a purchase order to move your cash into SWVXX for example (they treat it like buying a 'mutual fund'). Maybe this is a standard I've never seen? but anywhere else I have accounts, excess cash is automatically put into a sweep account to earn interest etc. you don't have to manually put in a "Buy" order as you would purchasing a stock or fund.

Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.

Maybe someone more in the know then I can comment on this? Thanks.
+1 I share you grief over such a simple thing as a default "sweep account". As much as I like Schwab and have used them for over 30 years the way they have mangled the handling of account cash balances over the last 5 (?) years is shameful. Used to be you had a default MMF and all was good. Then I think they wanted to bump-up deposits at Schwab Bank so they swept cash balances there and paid account owners a much lower interest rate. If you want to perserver you can purchase MMF shares. It does nothing to make investing easier, which is supposed to be what Schwab is about. Last year when we had a windfall we did not put it under the Schwab umbrella.
123,

This is not a Schwab issue. The SEC has forced all brokerage houses to do this, and the regulations have been in effect since at least 2016. During the 2008-2009 financial crisis, there was a concern about frozen money market accounts as well as "breaking the buck." Ultimately, the SEC put safeguards in place to make "cash accounts" liquid and that ultimately led to federal government securities making up the bulk of the funds. There are relatively complex rules pertaining to fees and gates, but the end result was having settlement funds fully liquid and containing "safe" government securities. Of course, this resulted in much smaller yields.

Most places, like Schwab, Fidelity, and Vanguard, will have multiple money market funds. However, they are not permitted to use these funds as settlement funds because of SEC regulations. This is why you cannot use your Schwab Advantage Account as the settlement fund--you must buy it.

No one is happy with this but it is the law of the land.
I don't think this is exactly true as Vanguard uses a money market fund for their settlement/sweep account (Vanguard Federal Money Market Fund (VMFXX)) where the yield is 1.6%. So somehow they figured it out....

Schwab insteads sweeps to FDIC insured bank account yielding 0.15% and specifically say that if you have cash that you do not need within a day or so that you should invest in their money market funds or other options.

I agree that it would be better if Schwab had better sweep account options like Vanguard but I don't find it difficult to do the sweep myself to the money market fund.

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Artsdoctor
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Re: Best options for cash in Schwab brokerage accounts?

Post by Artsdoctor » Tue May 08, 2018 6:35 pm

^ The Vanguard Federal Money Market fund was paying considerably less than its other money market funds. The current yield is a bit of a treat, although many of us would prefer a tax-exempt money market account as a settlement account. This is no longer possible.

NextMil
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Re: Best options for cash in Schwab brokerage accounts?

Post by NextMil » Tue May 15, 2018 8:53 am

I just moved my emergency fund from ally into this, because I was tired of having it outside of Schwab. Just a personal preference in trying to simplify my financial life. After expense ratio, I am still doing better than ally, right? As the expense ratio is baked into the return, correct?

onourway
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Re: Best options for cash in Schwab brokerage accounts?

Post by onourway » Tue May 15, 2018 8:57 am

NextMil wrote:
Tue May 15, 2018 8:53 am
I just moved my emergency fund from ally into this, because I was tired of having it outside of Schwab. Just a personal preference in trying to simplify my financial life. After expense ratio, I am still doing better than ally, right? As the expense ratio is baked into the return, correct?
The quoted yield is after expenses.

arf30
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Re: Best options for cash in Schwab brokerage accounts?

Post by arf30 » Tue May 15, 2018 9:03 am

Both Fidelity and Vanguard use money market funds as core/sweep positions, not sure why Schwab stopped doing it. Fidelity even gives you multiple options. It's a nice spot to land direct deposits/paychecks to earn a little interest before bills are paid out.

NextMil
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Re: Best options for cash in Schwab brokerage accounts?

Post by NextMil » Tue May 15, 2018 9:53 am

onourway wrote:
Tue May 15, 2018 8:57 am
NextMil wrote:
Tue May 15, 2018 8:53 am
I just moved my emergency fund from ally into this, because I was tired of having it outside of Schwab. Just a personal preference in trying to simplify my financial life. After expense ratio, I am still doing better than ally, right? As the expense ratio is baked into the return, correct?
The quoted yield is after expenses.
Thanks!

onourway
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Re: Best options for cash in Schwab brokerage accounts?

Post by onourway » Tue May 15, 2018 12:40 pm

arf30 wrote:
Tue May 15, 2018 9:03 am
Both Fidelity and Vanguard use money market funds as core/sweep positions, not sure why Schwab stopped doing it. Fidelity even gives you multiple options. It's a nice spot to land direct deposits/paychecks to earn a little interest before bills are paid out.
This is pretty much my only quibble with Schwab. It feels totally out of place for an otherwise excellent brokerage.

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indexfundfan
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Re: Best options for cash in Schwab brokerage accounts?

Post by indexfundfan » Wed May 16, 2018 6:08 am

I just wrote a feedback to Schwab asking them to consider adding money market funds as sweep vehicles, in particular pointing out that both Fidelity and Vanguard have this capability.
My signature has been deleted.

bberris
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Re: Best options for cash in Schwab brokerage accounts?

Post by bberris » Wed May 16, 2018 9:31 am

4-week, or 13 week tbills are my choice (at TDA, but I assume you get them at auction for free at Schwab too).
TDA recently disclosed $1 markup for buys and same markdown for sells per 1,000 bond. No transaction cost if you hold to maturity.

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