Is VMFXX better than VMMXX now?

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geospatial
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Is VMFXX better than VMMXX now?

Post by geospatial » Thu May 30, 2019 9:42 am

Vanguard Prime Money Market Fund (VMMXX) somewhat recently had a 7-day SEC yield as high as 2.48%. But it has been steadily dropping and currently has a 7-day SEC yield of 2.40%. About 34.9% is comprised of U.S. government obligations and treasury bills as of 4/30/19.

Vanguard Federal Money Market Fund (VMFXX) has a 7-day SEC yield of 2.33%. About 81.6% is comprised of U.S. government obligations and treasury bills as of 4/30/19.

As I understand it, for U.S. residents not in California, Connecticut, New York, or a state without income tax, the U.S. government portion of VMFXX is exempt from state income tax. And VMMXX is fully taxed as ordinary income in most states. (Please correct me if I'm wrong on this as I can't find a definitive list of states where this is true or not)

My federal marginal income tax bracket is 22% and my state income tax rate is 5.1% (MA).

So if I want to compare the after-tax yield of VMFXX to VMMXX, I think it goes like this:

VMMXX after tax yield: [2.40% * (1 - 0.22 - 0.051)] = ~1.75%
VMFXX after tax yield: [2.33% * (1 - 0.22 - (0.051 * (1-.816) ) )] = ~1.795%

Does this look right and does it mean it makes more sense to move my VMMXX holdings into VMFXX (the settlement fund)?

lostdog
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Re: Is VMFXX better than VMMXX now?

Post by lostdog » Thu May 30, 2019 10:27 am

Federal Money Market is a good one. It's very close between the two. I use it for the added simplicty. Since it's a settlement account, it shaves off one extra day for ACH transfers.
I don't invest looking in the rear view mirror and I know absolutely nothing about the future.

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ruralavalon
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Re: Is VMFXX better than VMMXX now?

Post by ruralavalon » Thu May 30, 2019 10:36 am

Such a tiny difference in net yield, that makes no difference to me since we do not have a large cash allocation. I hadn't even bothered to do the calculation.

Most people will be in the 12% tax bracket or lower, so for most people Vanguard Prime Money Market Fund (VMMXX) will continue to be the better choice.

lostdog wrote:
Thu May 30, 2019 10:27 am
Federal Money Market is a good one. It's very close between the two. I use it for the added simplicty. Since it's a settlement account, it shaves off one extra day for ACH transfers.
We also use Vanguard Federal Money Market Fund (VMFXX) in our taxable account (recieves dividends from stock index funds) for the convenience and simplicity.
Last edited by ruralavalon on Thu May 30, 2019 10:45 am, edited 3 times in total.
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retiringwhen
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Re: Is VMFXX better than VMMXX now?

Post by retiringwhen » Thu May 30, 2019 10:41 am

A quick review of you numbers looks correct. I am in a slightly higher state and the 27.8% federal tax bracket and the line crossed for me last week. I have been using VUSXX for a while as well and it has been neck and neck with Prime for a long time but now is better without question since I have relatively high state tax rates (6.37%)

mariezzz
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Re: Is VMFXX better than VMMXX now?

Post by mariezzz » Thu May 30, 2019 3:51 pm

Does anyone know: is there a place that lists the historical 7-day yield?

Uniballer
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Re: Is VMFXX better than VMMXX now?

Post by Uniballer » Thu May 30, 2019 4:12 pm

mariezzz wrote:
Thu May 30, 2019 3:51 pm
Does anyone know: is there a place that lists the historical 7-day yield?
Vanguard's Price History Search Tool shows the historical 7-day yield for Money Market Funds.

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Electron
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Re: Is VMFXX better than VMMXX now?

Post by Electron » Fri May 31, 2019 12:00 pm

geospatial wrote:
Thu May 30, 2019 9:42 am
As I understand it, for U.S. residents not in California, Connecticut, New York, or a state without income tax, the U.S. government portion of VMFXX is exempt from state income tax.
California does allow the partial exemption for VMFXX. Here is the text from the 2018 tax booklet.

"If the mutual fund has at least 50% of its assets invested in tax-exempt U.S. obligations and/or in California or its municipal obligations, that amount of dividend is exempt from California tax. The proportion of dividends that are tax‑exempt will be shown on your annual statement or statement issued with Form 1099-DIV, Dividends and Distributions."

In 2018, 77.79% of income was from U.S. Government obligations for the Vanguard Federal Money Market fund.

https://personal.vanguard.com/pdf/USGO_012019.pdf
Electron

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walletless
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Re: Is VMFXX better than VMMXX now?

Post by walletless » Fri May 31, 2019 12:15 pm

Electron wrote:
Fri May 31, 2019 12:00 pm
geospatial wrote:
Thu May 30, 2019 9:42 am
As I understand it, for U.S. residents not in California, Connecticut, New York, or a state without income tax, the U.S. government portion of VMFXX is exempt from state income tax.
California does allow the partial exemption for VMFXX. Here is the text from the 2018 tax booklet.

"If the mutual fund has at least 50% of its assets invested in tax-exempt U.S. obligations and/or in California or its municipal obligations, that amount of dividend is exempt from California tax. The proportion of dividends that are tax‑exempt will be shown on your annual statement or statement issued with Form 1099-DIV, Dividends and Distributions."

In 2018, 77.79% of income was from U.S. Government obligations for the Vanguard Federal Money Market fund.

https://personal.vanguard.com/pdf/USGO_012019.pdf
Do you have to do anything special at tax filing time besides inputting the 1099 forms to get this tax break for CA?

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Re: Is VMFXX better than VMMXX now?

Post by Dottie57 » Fri May 31, 2019 12:47 pm

ruralavalon wrote:
Thu May 30, 2019 10:36 am
Such a tiny difference in net yield, that makes no difference to me since we do not have a large cash allocation. I hadn't even bothered to do the calculation.

Most people will be in the 12% tax bracket or lower, so for most people Vanguard Prime Money Market Fund (VMMXX) will continue to be the better choice.

lostdog wrote:
Thu May 30, 2019 10:27 am
Federal Money Market is a good one. It's very close between the two. I use it for the added simplicty. Since it's a settlement account, it shaves off one extra day for ACH transfers.
We also use Vanguard Federal Money Market Fund (VMFXX) in our taxable account (recieves dividends from stock index funds) for the convenience and simplicity.
Does “most people” include those who are single?

retiringwhen
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Re: Is VMFXX better than VMMXX now?

Post by retiringwhen » Fri May 31, 2019 12:51 pm

Uniballer wrote:
Thu May 30, 2019 4:12 pm
mariezzz wrote:
Thu May 30, 2019 3:51 pm
Does anyone know: is there a place that lists the historical 7-day yield?
Vanguard's Price History Search Tool shows the historical 7-day yield for Money Market Funds.
Does anyone know how to get historical rolling 1yr total returns for funds? I have tracked the 1yr total return that is updated monthly on the funds page for a few funds but would be interested in expanding my collection of data....

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ResearchMed
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Re: Is VMFXX better than VMMXX now?

Post by ResearchMed » Fri May 31, 2019 12:52 pm

mariezzz wrote:
Thu May 30, 2019 3:51 pm
Does anyone know: is there a place that lists the historical 7-day yield?
This link should show/compare several MM type funds, with both 7-day and YTD, and multi-year returns:

https://institutional.vanguard.com/VGAp ... eviews/all

You'll need to click on the Taxable Cash Equivalents toward the bottom of the list.
(They don't make this complete list easy to find!)

RM
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RCL
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Re: Is VMFXX better than VMMXX now?

Post by RCL » Fri May 31, 2019 1:02 pm

Edit:I forgot to use the quotes
Walletless:
I'll try to answer this, as I struggled with this recently. Don't take this for the gospel truth..make sure you do your own research.

My Vanguard 1099 only shows Interest paid me for securities like the Federal Money Market as Ordinary Dividends.
To remove the portion of the reported Interest that qualifies For California exemption, you would use California Form CA (540). This form has three columns Federal Amounts from your 1040, Subtractions, and Additions.

Your 1040 taxable interest amount shown does not include any reductions that can be used on your state form...so you have to reduce the Federally reported taxable interest amount.

Take the Interest amount reported on your 1099 for the asset (Federal Money Market) and multiply it by the percentage mentioned above for that particular year (for 2018 it was 77.79%)
Take that result and enter it onto line 2(b) column B (Subtractions) of the state CA (540) form.
The dollar amount used to determine your tax on Ordinary dividends will be reduced by this amount for the state.

Hope this sheds some light on the subject and have not steered you in the wrong direction
It Is Best To Consult Others Before Taking Unusual Actions

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Electron
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Re: Is VMFXX better than VMMXX now?

Post by Electron » Fri May 31, 2019 1:07 pm

walletless wrote:
Fri May 31, 2019 12:15 pm
Do you have to do anything special at tax filing time besides inputting the 1099 forms to get this tax break for CA?
The 1099 forms do not provide the required information. Take a look at California Form CA (540) which stands for California Adjustments.

Each year Vanguard will provide the percentages similar to the document I referenced above. Make a calculation and enter the exempted amount on CA (540) Part I, Line 2, Column B. Amounts in that column will get subtracted from income.
Electron

retiringwhen
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Re: Is VMFXX better than VMMXX now?

Post by retiringwhen » Fri May 31, 2019 1:09 pm

ResearchMed wrote:
Fri May 31, 2019 12:52 pm
mariezzz wrote:
Thu May 30, 2019 3:51 pm
Does anyone know: is there a place that lists the historical 7-day yield?
This link should show/compare several MM type funds, with both 7-day and YTD, and multi-year returns:

https://institutional.vanguard.com/VGAp ... eviews/all

You'll need to click on the Taxable Cash Equivalents toward the bottom of the list.
(They don't make this complete list easy to find!)

RM
I was looking for the 1 year returns and your link (I don't normally go to the institutional section of the vanguard site) when you click through to the individual fund, the fund details page actually has each one year return for the last 10 years! that is not on the individual/personal page. Thanks! Here it is for VUSXX https://institutional.vanguard.com/web/ ... /fund/0011

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walletless
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Re: Is VMFXX better than VMMXX now?

Post by walletless » Fri May 31, 2019 1:12 pm

RCL wrote:
Fri May 31, 2019 1:02 pm
I'll try to answer this, as I struggled with this recently
Electron wrote:
Fri May 31, 2019 1:07 pm
The 1099 forms do not provide the required information. Take a look at California Form CA (540) which stands for California Adjustments.

Each year Vanguard will provide the percentages similar to the document I referenced above. Make a calculation and enter the exempted amount on CA (540) Part I, Line 2, Column B. Amounts in that column will get subtracted from income.
Thanks RCL and Electron - super useful!

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ResearchMed
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Re: Is VMFXX better than VMMXX now?

Post by ResearchMed » Fri May 31, 2019 1:16 pm

retiringwhen wrote:
Fri May 31, 2019 1:09 pm
ResearchMed wrote:
Fri May 31, 2019 12:52 pm
mariezzz wrote:
Thu May 30, 2019 3:51 pm
Does anyone know: is there a place that lists the historical 7-day yield?
This link should show/compare several MM type funds, with both 7-day and YTD, and multi-year returns:

https://institutional.vanguard.com/VGAp ... eviews/all

You'll need to click on the Taxable Cash Equivalents toward the bottom of the list.
(They don't make this complete list easy to find!)

RM
I was looking for the 1 year returns and your link (I don't normally go to the institutional section of the vanguard site) when you click through to the individual fund, the fund details page actually has each one year return for the last 10 years! that is not on the individual/personal page. Thanks! Here it is for VUSXX https://institutional.vanguard.com/web/ ... /fund/0011
One click, and this link shows the same thing you see on what I think is your second click.

No matter, if you've got what you want.
This institutional link has SO much more information than other views.
Just make sure to click in the upper right for "all share classes" (if desired).

RM
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ruralavalon
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Re: Is VMFXX better than VMMXX now?

Post by ruralavalon » Fri May 31, 2019 1:47 pm

Dottie57 wrote:
Fri May 31, 2019 12:47 pm
ruralavalon wrote:
Thu May 30, 2019 10:36 am
Such a tiny difference in net yield, that makes no difference to me since we do not have a large cash allocation. I hadn't even bothered to do the calculation.

Most people will probably be in the 12% tax bracket or lower, so for most people Vanguard Prime Money Market Fund (VMMXX) will continue to be the better choice.

lostdog wrote:
Thu May 30, 2019 10:27 am
Federal Money Market is a good one. It's very close between the two. I use it for the added simplicty. Since it's a settlement account, it shaves off one extra day for ACH transfers.
We also use Vanguard Federal Money Market Fund (VMFXX) in our taxable account (recieves dividends from stock index funds) for the convenience and simplicity.
Does “most people” include those who are single?
Yes, that is for all "households".

Prior to the recent bracket changes about 77% of households were in the 15% bracket or lower. The Tax Foundation (10/15/2015), "How Many Taxpayers Fall Into Each Income Tax Bracket?". Motley Fool (01/16/2017), "The Most Common Tax Bracket in America".

My thought is that will probably continue to be true, the large majority of households will be in the 12% bracket or lower.

I don't know any statistic which separates out the bracket percentages for single filers, but never really looked for that.
Last edited by ruralavalon on Fri May 31, 2019 3:06 pm, edited 2 times in total.
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Dottie57
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Re: Is VMFXX better than VMMXX now?

Post by Dottie57 » Fri May 31, 2019 1:57 pm

Just a note on VMMXX - Prime Money Market.

This fund has slightly ver 50% in Yankee/Foreign bonds. In other words foreign bonds denominated in U.S. dollars.

This gives me pause. How about others?

VMFXX - Federal Money Market Funds is of course bonds from U.S. federal government, but not necessarily treasuries.

VUSXX - U.S. treasury Money Market fund. 100% treasury bills.

The first two have a 3k minimum
VUSXX has a 50k minimum.


These all have pretty big differences.

integrity
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Re: Is VMFXX better than VMMXX now?

Post by integrity » Fri May 31, 2019 3:12 pm

For those looking at VMRXX at some of the links posted above, keep in mind this is an Admiral fund with $5,000,000 minimum.
--Barry

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ResearchMed
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Re: Is VMFXX better than VMMXX now?

Post by ResearchMed » Fri May 31, 2019 3:20 pm

integrity wrote:
Fri May 31, 2019 3:12 pm
For those looking at VMRXX at some of the links posted above, keep in mind this is an Admiral fund with $5,000,000 minimum.
--Barry
One can get this in some Employer plans.
:happy

RM
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catalina355
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Re: Is VMFXX better than VMMXX now?

Post by catalina355 » Fri May 31, 2019 3:26 pm

retiringwhen wrote:
Thu May 30, 2019 10:41 am
A quick review of you numbers looks correct. I am in a slightly higher state and the 27.8% federal tax bracket and the line crossed for me last week. I have been using VUSXX for a while as well and it has been neck and neck with Prime for a long time but now is better without question since I have relatively high state tax rates (6.37%)
My spreadsheet shows that Treasury MM is still better than Prime and I have similar brackets to yours.

I created the spreadsheet from this thread and I do not assume that state taxes are fully deductible.

viewtopic.php?t=248539

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catalina355
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Re: Is VMFXX better than VMMXX now?

Post by catalina355 » Fri May 31, 2019 3:28 pm

Dottie57 wrote:
Fri May 31, 2019 12:47 pm
ruralavalon wrote:
Thu May 30, 2019 10:36 am
Such a tiny difference in net yield, that makes no difference to me since we do not have a large cash allocation. I hadn't even bothered to do the calculation.

Most people will be in the 12% tax bracket or lower, so for most people Vanguard Prime Money Market Fund (VMMXX) will continue to be the better choice.

lostdog wrote:
Thu May 30, 2019 10:27 am
Federal Money Market is a good one. It's very close between the two. I use it for the added simplicty. Since it's a settlement account, it shaves off one extra day for ACH transfers.
We also use Vanguard Federal Money Market Fund (VMFXX) in our taxable account (recieves dividends from stock index funds) for the convenience and simplicity.
Does “most people” include those who are single?
[deleted]
Last edited by catalina355 on Fri May 31, 2019 3:39 pm, edited 1 time in total.

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catalina355
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Re: Is VMFXX better than VMMXX now?

Post by catalina355 » Fri May 31, 2019 3:29 pm

walletless wrote:
Fri May 31, 2019 1:12 pm
RCL wrote:
Fri May 31, 2019 1:02 pm
I'll try to answer this, as I struggled with this recently
Electron wrote:
Fri May 31, 2019 1:07 pm
The 1099 forms do not provide the required information. Take a look at California Form CA (540) which stands for California Adjustments.

Each year Vanguard will provide the percentages similar to the document I referenced above. Make a calculation and enter the exempted amount on CA (540) Part I, Line 2, Column B. Amounts in that column will get subtracted from income.
Thanks RCL and Electron - super useful!
TurboTax deals with this nicely.

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catalina355
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Re: Is VMFXX better than VMMXX now?

Post by catalina355 » Fri May 31, 2019 3:36 pm

ruralavalon wrote:
Fri May 31, 2019 1:47 pm
Dottie57 wrote:
Fri May 31, 2019 12:47 pm
ruralavalon wrote:
Thu May 30, 2019 10:36 am
Such a tiny difference in net yield, that makes no difference to me since we do not have a large cash allocation. I hadn't even bothered to do the calculation.

Most people will probably be in the 12% tax bracket or lower, so for most people Vanguard Prime Money Market Fund (VMMXX) will continue to be the better choice.

lostdog wrote:
Thu May 30, 2019 10:27 am
Federal Money Market is a good one. It's very close between the two. I use it for the added simplicty. Since it's a settlement account, it shaves off one extra day for ACH transfers.
We also use Vanguard Federal Money Market Fund (VMFXX) in our taxable account (recieves dividends from stock index funds) for the convenience and simplicity.
Does “most people” include those who are single?
Yes, that is for all "households".

Prior to the recent bracket changes about 77% of households were in the 15% bracket or lower. The Tax Foundation (10/15/2015), "How Many Taxpayers Fall Into Each Income Tax Bracket?". Motley Fool (01/16/2017), "The Most Common Tax Bracket in America".

My thought is that will probably continue to be true, the large majority of households will be in the 12% bracket or lower.

I don't know any statistic which separates out the bracket percentages for single filers, but never really looked for that.
https://www.irs.gov/statistics/soi-tax- ... percentile

You are correct about most. Of course if you are not in the 15% bracket or lower, Prime MM may not be the best best choice.

JackoC
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Re: Is VMFXX better than VMMXX now?

Post by JackoC » Fri May 31, 2019 4:01 pm

Doesn't really matter what's a 'sweeping generalization', only your own situation. :happy For us the after marginal tax rate yield of VUSXX is typically highest, lately by around 4bp over VMFXX (often the pretax yield of VUSXX is actually slightly higher lately), 7bp ahead of VMMXX. Since VMFXX is the default 'settlement account' (my Vang account is converted to brokerage) and that account is generally to collect and hold fairly small overall portfolio % of cash to then send to bank acct to pay bills, I give myself a break on not bothering to open a VUSXX acct and shift to VMFXX as necessary. Wife's (non brokerage) MM account is for strategic reserve so that's in VUSXX. The argument for VMMXX 'it's only a little more risk' kind of breaks down when you're getting *less* after tax.

For marginal tax rate, I recommend simulating it in Turbotax or similar software to find out the real value. It's often not what you'd get off a simple table of brackets by income if there's any complexity whatsoever in your taxes.

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Re: Is VMFXX better than VMMXX now?

Post by mariezzz » Sat Jun 01, 2019 5:12 pm

Uniballer wrote:
Thu May 30, 2019 4:12 pm
mariezzz wrote:
Thu May 30, 2019 3:51 pm
Does anyone know: is there a place that lists the historical 7-day yield?
Vanguard's Price History Search Tool shows the historical 7-day yield for Money Market Funds.
Thanks, but that gives the price per share (always $1), not the 7-day yield.

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Electron
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Re: Is VMFXX better than VMMXX now?

Post by Electron » Sun Jun 02, 2019 11:15 am

mariezzz wrote:
Sat Jun 01, 2019 5:12 pm
Thanks, but that gives the price per share (always $1), not the 7-day yield.
The Price History Search Tool provides both NAV and Yield for Money Market funds and Bond Funds. See example below.

https://personal.vanguard.com/us/funds/ ... &year=#res
Electron

mariezzz
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Re: Is VMFXX better than VMMXX now?

Post by mariezzz » Mon Jun 03, 2019 6:27 pm

Electron wrote:
Sun Jun 02, 2019 11:15 am
mariezzz wrote:
Sat Jun 01, 2019 5:12 pm
Thanks, but that gives the price per share (always $1), not the 7-day yield.
The Price History Search Tool provides both NAV and Yield for Money Market funds and Bond Funds. See example below.

https://personal.vanguard.com/us/funds/ ... &year=#res
THANKS!

nolesrule
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Re: Is VMFXX better than VMMXX now?

Post by nolesrule » Mon Jun 03, 2019 9:30 pm

geospatial wrote:
Thu May 30, 2019 9:42 am
And VMMXX is fully taxed as ordinary income in most states.
Minor correction. VMMXX is not fully state taxable in most states. Last year 28.23% of income was from Federal obligations.

It's not 100%, but it's not nothing either. Unless you're talking 6 figures of dividends, it's a minor difference between Prime and Federal.

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