Mutual Fund Vs Money Market Account

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Topic Author
MOInvestor
Posts: 7
Joined: Thu Sep 24, 2020 4:33 pm

Mutual Fund Vs Money Market Account

Post by MOInvestor »

Fast Facts:
Under the age of 35
Married
No Debt

Topic:
I'm researching the best non-emergency fund, non-returement wallet. I have 6 months savings in a liquid account and the rest is additional savings we wont need immediately.
Ex: I'm considering adding savings for a future home & other non-retirement goals into my non-IRA account to appreciate for 2+years & figure it's better than my bank account. Money Market Accounts seem like a paltry choice if it'll sit for 5 years.

Question: What are your thoughts on putting all additional savings into our non-retirement Vangaurd outside of our emergency savings? Any recommendations?
dbr
Posts: 35952
Joined: Sun Mar 04, 2007 9:50 am

Re: Mutual Fund Vs Money Market Account

Post by dbr »

Depending on what you mean by the "+" in "2+" years appreciation is a contradiction in terms. Appreciation in investing depends on compounding over long terms to be meaningful.

But, what investments are you talking about in your non-IRA Vanguard account? It could well be that it would be simple and logical to add in this money with what is already there. Even if it is all stocks and stocks are down when you want the money you can exchange bonds for stocks in your retirement accounts and keep everything even.
Tipro
Posts: 41
Joined: Sun Jul 14, 2013 8:22 pm

Re: Mutual Fund Vs Money Market Account

Post by Tipro »

Short term bond ETF like ISTB may suite you nicely
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ruralavalon
Posts: 21440
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Location: Illinois

Re: Mutual Fund Vs Money Market Account

Post by ruralavalon »

MOInvestor wrote: Thu Jun 10, 2021 1:46 pm Fast Facts:
Under the age of 35
Married
No Debt

Topic:
I'm researching the best non-emergency fund, non-returement wallet. I have 6 months savings in a liquid account and the rest is additional savings we wont need immediately.
Ex: I'm considering adding savings for a future home & other non-retirement goals into my non-IRA account to appreciate for 2+years & figure it's better than my bank account. Money Market Accounts seem like a paltry choice if it'll sit for 5 years.

Question: What are your thoughts on putting all additional savings into our non-retirement Vangaurd outside of our emergency savings? Any recommendations?
Short-term CDs with maturity around your "2+" or "5 years " time line.

A short-term bond fund with good credit quality. Vanguard Short-Term Federal Fund;Investor (VSGBX), current SEC Yield = 0.62%.

Vanguard Ultra-Short-Term Bond Fund Investor Shares (VUBFX), current SEC Yield = 0.29%. BlackRock Ultra Short-Term Bond ETF (ICSH), current SEC Yield = 0.28%.

I savings bonds, "I Bond interest is calculated in six month cycles, based on the original date of issue. Each I Bond's composite rate (fixed and inflation) remains in effect for a total of six months, and then changes to a combination of that I Bond's fixed rate plus the most recently announced inflation adjustment for the next six months. That cycle continues for the life of an I Bond".

"The composite rate for I bonds issued from May 2021 through October 2021 is 3.54 percent. This rate applies for the first six months you own the bond." link.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
exodusNH
Posts: 245
Joined: Wed Jan 06, 2021 8:21 pm

Re: Mutual Fund Vs Money Market Account

Post by exodusNH »

ruralavalon wrote: Thu Jun 10, 2021 3:53 pm
MOInvestor wrote: Thu Jun 10, 2021 1:46 pm Fast Facts:
Under the age of 35
Married
No Debt

Topic:
I'm researching the best non-emergency fund, non-returement wallet. I have 6 months savings in a liquid account and the rest is additional savings we wont need immediately.
Ex: I'm considering adding savings for a future home & other non-retirement goals into my non-IRA account to appreciate for 2+years & figure it's better than my bank account. Money Market Accounts seem like a paltry choice if it'll sit for 5 years.

Question: What are your thoughts on putting all additional savings into our non-retirement Vangaurd outside of our emergency savings? Any recommendations?
I savings bonds, "I Bond interest is calculated in six month cycles, based on the original date of issue. Each I Bond's composite rate (fixed and inflation) remains in effect for a total of six months, and then changes to a combination of that I Bond's fixed rate plus the most recently announced inflation adjustment for the next six months. That cycle continues for the life of an I Bond".

"The composite rate for I bonds issued from May 2021 through October 2021 is 3.54 percent. This rate applies for the first six months you own the bond." link.
Keeping in mind the $20K per-couple-limit (assuming no trusts) as well as the one-year lockup and 3-month penalty if sold in less 5 years. But within those constraints, they are a great option!
h82goslw
Posts: 284
Joined: Fri Jun 17, 2016 5:44 am

Re: Mutual Fund Vs Money Market Account

Post by h82goslw »

exodusNH wrote: Thu Jun 10, 2021 4:45 pm
ruralavalon wrote: Thu Jun 10, 2021 3:53 pm
MOInvestor wrote: Thu Jun 10, 2021 1:46 pm Fast Facts:
Under the age of 35
Married
No Debt

Topic:
I'm researching the best non-emergency fund, non-returement wallet. I have 6 months savings in a liquid account and the rest is additional savings we wont need immediately.
Ex: I'm considering adding savings for a future home & other non-retirement goals into my non-IRA account to appreciate for 2+years & figure it's better than my bank account. Money Market Accounts seem like a paltry choice if it'll sit for 5 years.

Question: What are your thoughts on putting all additional savings into our non-retirement Vangaurd outside of our emergency savings? Any recommendations?
I savings bonds, "I Bond interest is calculated in six month cycles, based on the original date of issue. Each I Bond's composite rate (fixed and inflation) remains in effect for a total of six months, and then changes to a combination of that I Bond's fixed rate plus the most recently announced inflation adjustment for the next six months. That cycle continues for the life of an I Bond".

"The composite rate for I bonds issued from May 2021 through October 2021 is 3.54 percent. This rate applies for the first six months you own the bond." link.
Keeping in mind the $20K per-couple-limit (assuming no trusts) as well as the one-year lockup and 3-month penalty if sold in less 5 years. But within those constraints, they are a great option!
Can I bonds be purchased within a SEP IRA? (Sorry for hijacking your thread).
exodusNH
Posts: 245
Joined: Wed Jan 06, 2021 8:21 pm

Re: Mutual Fund Vs Money Market Account

Post by exodusNH »

h82goslw wrote: Thu Jun 10, 2021 6:05 pm
exodusNH wrote: Thu Jun 10, 2021 4:45 pm
ruralavalon wrote: Thu Jun 10, 2021 3:53 pm
MOInvestor wrote: Thu Jun 10, 2021 1:46 pm Fast Facts:
Under the age of 35
Married
No Debt

Topic:
I'm researching the best non-emergency fund, non-returement wallet. I have 6 months savings in a liquid account and the rest is additional savings we wont need immediately.
Ex: I'm considering adding savings for a future home & other non-retirement goals into my non-IRA account to appreciate for 2+years & figure it's better than my bank account. Money Market Accounts seem like a paltry choice if it'll sit for 5 years.

Question: What are your thoughts on putting all additional savings into our non-retirement Vangaurd outside of our emergency savings? Any recommendations?
I savings bonds, "I Bond interest is calculated in six month cycles, based on the original date of issue. Each I Bond's composite rate (fixed and inflation) remains in effect for a total of six months, and then changes to a combination of that I Bond's fixed rate plus the most recently announced inflation adjustment for the next six months. That cycle continues for the life of an I Bond".

"The composite rate for I bonds issued from May 2021 through October 2021 is 3.54 percent. This rate applies for the first six months you own the bond." link.
Keeping in mind the $20K per-couple-limit (assuming no trusts) as well as the one-year lockup and 3-month penalty if sold in less 5 years. But within those constraints, they are a great option!
Can I bonds be purchased within a SEP IRA? (Sorry for hijacking your thread).
No, either directly from Treasury Direct or as paper bonds in lieu of your tax return. So, there's no rebalancing opportunity. Each one it locked for a year after purchase. After that you can redeem (< 5 years with a small penalty) as desired. You can defer recognizing taxes until you redeem them. So there is a tax-deferred component to them. They're kind of like an emergency fund. I'm using them to cover property taxes and home insurance in retirement.
togb
Posts: 256
Joined: Mon Oct 23, 2017 8:36 pm

Re: Mutual Fund Vs Money Market Account

Post by togb »

I use VCSH instead of a money market. It yields about 2%. It will bounce around a little in share price, but not enough to bother me.
I also have VCLT, but that's not my money market substitute. Both are part of what I consider my "safe money" in a market downturn or emergency.
Topic Author
MOInvestor
Posts: 7
Joined: Thu Sep 24, 2020 4:33 pm

Re: Mutual Fund Vs Money Market Account

Post by MOInvestor »

Tipro wrote: Thu Jun 10, 2021 2:17 pm Short term bond ETF like ISTB may suite you nicely
Thank you for your response. I'm invested in VTSAX {80%), VTIAX (10%), and VBTLX (10%) in my non-IRA. I was contemplating adding saving to VTSAX.
Topic Author
MOInvestor
Posts: 7
Joined: Thu Sep 24, 2020 4:33 pm

Re: Mutual Fund Vs Money Market Account

Post by MOInvestor »

Thank you everyone for your input. Please feel free to add more as you like.

You've given me plenty to consider. I greatly appreciate the responses and sources. I'll be reading up on each of the funds and Bonds that were mentioned.
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