Lazy way to increase returns on cash in Vanguard

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Greg in Idaho
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Lazy way to increase returns on cash in Vanguard

Post by Greg in Idaho »

I have a few hundred K of money sitting in VMFXX (the default money market settlement fund at Vanguard)...much of it destined to DCA into VBTLX over a few years, and some as emergency fund. I really don't want to move that money out of Vanguard, but would like to increase my returns, above the current .72% SEC yield it offers. Their list of fixed income rates show pretty much everything beating VMFXX on yield.

https://personal.vanguard.com/us/FixedIncomeTrading

Recommendations on a somewhat lazy strategy for getting a better fixed income return at Vanguard?
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midareff
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Re: Lazy way to increase returns on cash in Vanguard

Post by midareff »

Ally Savings is 1.05% and you can time CD's with higher rates if you plan to DCA in over time. I believe you can check CD rates at www.bankrate.com
mongstradamus
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Re: Lazy way to increase returns on cash in Vanguard

Post by mongstradamus »

I don't know how safe and what kind of returns are you looking for , you could switch your federal money market to vanguards prime money market. The sec yield right now is .97% I believe a bit better then federal money market. If you want to be a little more risky a short term corporate bond fund could be an option. I think VFSTX, vanguards short term investment grade active fund, or VSCSX, vanguard short term corporate index fund , could fit. The second option is a lot more risky, the first option is probably safer and lazier way in general.
Da5id
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Re: Lazy way to increase returns on cash in Vanguard

Post by Da5id »

Greg in Idaho wrote:I have a few hundred K of money sitting in VMFXX (the default money market settlement fund at Vanguard)...much of it destined to DCA into VBTLX over a few years, and some as emergency fund. I really don't want to move that money out of Vanguard, but would like to increase my returns, above the current .72% SEC yield it offers. Their list of fixed income rates show pretty much everything beating VMFXX on yield.

https://personal.vanguard.com/us/FixedIncomeTrading

Recommendations on a somewhat lazy strategy for getting a better fixed income return at Vanguard?
If few years = 3, you could do:
first year's money - Prime
second year's money - 1 year CD (currently 1.25%)
third year's money - 2 year CD (currently 1.65%)

There is also 18 month CD (currently 1.55%) if you want to split the second years money into two parts.

If you need to keep access to the money more readily than a CD, and if you don't mind risk of presumably a small loss, you could go for a short term bond fund, like VFSUX or VBIRX.
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brother7
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Re: Lazy way to increase returns on cash in Vanguard

Post by brother7 »

Like mongstradamas, I'd consider a corporate bond fund.

My vote is for Vanguard Intermediate-Term Corporate Bond Index Fund Admiral Shares (VICSX), 1-year return 2.41%, influenced by my lastest book purchase Get a Financial Life: Personal Finance in Your Twenties and Thirties in which author Beth Kobliner suggests a middle-of-the-road approach with "a fund that invests entirely or primarily in intermediate-term bonds issued by highly rated corporations".
Da5id
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Re: Lazy way to increase returns on cash in Vanguard

Post by Da5id »

brother7 wrote:Like mongstradamas, I'd consider a corporate bond fund.

My vote is for Vanguard Intermediate-Term Corporate Bond Index Fund Admiral Shares (VICSX), 1-year return 2.41%
That funds duration is 6.5 years, and he expects to be out of it within 2-3 years. Seems an aggressive alternative to a money market account.
NiceUnparticularMan
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Re: Lazy way to increase returns on cash in Vanguard

Post by NiceUnparticularMan »

midareff wrote:Ally Savings is 1.05% and you can time CD's with higher rates if you plan to DCA in over time. I believe you can check CD rates at http://www.bankrate.com
This seems like the right solution to me. Put the emergency fund in a decent savings account, put the DCA amounts in appropriate CDs. That's using the right tool for the right job.
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brother7
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Re: Lazy way to increase returns on cash in Vanguard

Post by brother7 »

Da5id wrote:
brother7 wrote:Like mongstradamas, I'd consider a corporate bond fund.

My vote is for Vanguard Intermediate-Term Corporate Bond Index Fund Admiral Shares (VICSX), 1-year return 2.41%
That funds duration is 6.5 years, and he expects to be out of it within 2-3 years. Seems an aggressive alternative to a money market account.
The OP can exchange shares of a bond fund at any time as part of his DCA strategy. I prefer the timing flexibility of a bond fund versus the fixed-term inflexibility of CDs, just in case one changes one's mind.
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goingup
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Re: Lazy way to increase returns on cash in Vanguard

Post by goingup »

Another vote here for Vanguard Prime MM (VMMXX). Yield is .97% now.

Your plan to DCA into VBTLX over several years seems unwieldy. I imagine you're concerned about a NAV decline due to rising rates. Could well be, but the NAV has already slumped about 4% since last summer. Anyways, general advice with bonds is just to get allocated as DCA'ing is less consequential than with stocks. I'm also have a hard time getting a final lump of cash into Tax-Exempt Interm Muni bond fund. The fear of regret is a strong emotion. :|
Da5id
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Re: Lazy way to increase returns on cash in Vanguard

Post by Da5id »

brother7 wrote: That funds duration is 6.5 years, and he expects to be out of it within 2-3 years. Seems an aggressive alternative to a money market account.
The OP can exchange shares of a bond fund at any time as part of his DCA strategy. I prefer the timing flexibility of a bond fund versus the fixed-term inflexibility of CDs, just in case one changes one's mind.[/quote]

That is fine. But why an intermediate term corporate fund as an alternative to a money market?
mega317
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Re: Lazy way to increase returns on cash in Vanguard

Post by mega317 »

Depending on where you live and your tax bracket, a state muni money market could slightly increase your returns while being still at Vanguard and extremely lazy.
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willthrill81
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Re: Lazy way to increase returns on cash in Vanguard

Post by willthrill81 »

CIT Bank is currently paying 1.15% on savings accounts, plus you get bonus cash depending on the amount in the account.
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bloom2708
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Re: Lazy way to increase returns on cash in Vanguard

Post by bloom2708 »

Bring your own lunch to work 1 day per week for the next year. That will net you far more than reaching for .2%.
NiceUnparticularMan
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Re: Lazy way to increase returns on cash in Vanguard

Post by NiceUnparticularMan »

goingup wrote:Your plan to DCA into VBTLX over several years seems unwieldy. I imagine you're concerned about a NAV decline due to rising rates. Could well be, but the NAV has already slumped about 4% since last summer. Anyways, general advice with bonds is just to get allocated as DCA'ing is less consequential than with stocks.
I'd also advise just forgetting about the DCA. Fundamentally this amounts to temporarily holding one mix of fixed-income before shifting over to another mix of fixed-income over time. And there is no good reason to believe trying to time the fixed-income markets in that way will end up profitable.
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brother7
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Re: Lazy way to increase returns on cash in Vanguard

Post by brother7 »

Da5id wrote:
brother7 wrote: The OP can exchange shares of a bond fund at any time as part of his DCA strategy. I prefer the timing flexibility of a bond fund versus the fixed-term inflexibility of CDs, just in case one changes one's mind.
That is fine. But why an intermediate term corporate fund as an alternative to a money market?
Assuming OP wants to be in fixed-income, I was aiming to get a higher return without assuming too much risk.
I guess the correct choice depends on one's risk tolerance. I lean towards the riskier side of moderate.
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Re: Lazy way to increase returns on cash in Vanguard

Post by wstrdg »

PurePoint Financial online savings is paying 1.25%
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Greg in Idaho
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Re: Lazy way to increase returns on cash in Vanguard

Post by Greg in Idaho »

Thanks for all the recommendations...although once again, I'd like to keep all the money in Vanguard (and really don't want to open new accounts at Ally, etc., move the money, move it back)...remember the lazy part...
atlnuke
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Re: Lazy way to increase returns on cash in Vanguard

Post by atlnuke »

If you do the money market thing, make sure you read the prospectus. Some of them still do the overnight lending thing which busted some funds in 2007. The money market funds might not get bailed out next time.
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willthrill81
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Re: Lazy way to increase returns on cash in Vanguard

Post by willthrill81 »

Greg in Idaho wrote:Thanks for all the recommendations...although once again, I'd like to keep all the money in Vanguard (and really don't want to open new accounts at Ally, etc., move the money, move it back)...remember the lazy part...
I would probably lean toward Vanguard's short- and intermediate-term investment grade bond funds.
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livesoft
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Re: Lazy way to increase returns on cash in Vanguard

Post by livesoft »

I will give very specific advice:

Whenever BND or AGG appear to have gone up about 0.5% in one day, place an order to sell some of your VBTLX before the market closes, say 20% of what you own and buy VSCSX.

Whenever BND or AGG appear to have gone down by about 0.4% in one day, place an order to buy VBTLX before the market closes. It is your choice whether to use your cash from a money market fund or what you have in VSCSX, but make sure it is 1.5 times the amount you last sold VBTLX for.

Full disclosure: I own VBTLX, VBMFX, FBIDX, AGG, BND, and VCSH (ETF share class of VSCSX). Also I don't have any cash to speak of sitting around doing nothing.

And you can make this totally lazy by having Vanguard automatically send an alert to your smart phone when the prices of AGG and/or BND change by the amounts above from their previous closing prices.
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Desert
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Re: Lazy way to increase returns on cash in Vanguard

Post by Desert »

Depending on your tax bracket, you could consider Vanguard's limited-term tax-exempt muni fund, VMLUX. It has a duration of about 2 years, and a yield of 1.24%. For an investor in the 25% tax bracket, that's a taxable equivalent yield of 1.65%. Not real exciting, but a bit more yield for a bit more risk.
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Re: Lazy way to increase returns on cash in Vanguard

Post by friar1610 »

livesoft wrote:I will give very specific advice:

Whenever BND or AGG appear to have gone up about 0.5% in one day, place an order to sell some of your VBTLX before the market closes, say 20% of what you own and buy VSCSX.

Whenever BND or AGG appear to have gone down by about 0.4% in one day, place an order to buy VBTLX before the market closes. It is your choice whether to use your cash from a money market fund or what you have in VSCSX, but make sure it is 1.5 times the amount you last sold VBTLX for.

Full disclosure: I own VBTLX, VBMFX, FBIDX, AGG, BND, and VCSH (ETF share class of VSCSX). Also I don't have any cash to speak of sitting around doing nothing.

And you can make this totally lazy by having Vanguard automatically send an alert to your smart phone when the prices of AGG and/or BND change by the amounts above from their previous closing prices.
Do VG's frequent trading restrictions ever get in the way of doing as you described? Or does a complete price swing (up .5% and then back down .4%) happen so infrequently that you're generally outside the restricted period (60 days IIRC)?
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livesoft
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Re: Lazy way to increase returns on cash in Vanguard

Post by livesoft »

friar1610 wrote:Do VG's frequent trading restrictions ever get in the way of doing as you described? Or does a complete price swing (up .5% and then back down .4%) happen so infrequently that you're generally outside the restricted period (60 days IIRC)?
No because the Vanguard frequent trading restrictions are lame and everybody knows how to get around them, but then I don't do this at Vanguard. One could and should use ETFs anyways with this scheme anyways.

Also note that you wrote about a price swing. I wrote about one day price movements. If a bond fund goes up at least 0.5% in one day, that's quite a bit different to going up 0.5% in 2 days or longer.
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