Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
[VMMXX yield is now over 2.00%, see this post (Page 4) --admin LadyGeek]
(No, it didn't break the buck.) After almost a lost decade for Money Market Funds, we are finally up to "triple digit" yields (100 basis points).
In 2 years VMMXX yield has increased from 0.01% to 1.00%, while Ally online savings account has increased from 1.00% to 1.05%.
So the question is, will Money Market Funds again become a non-ridiculous place to place some cash. The yields still lag online savings accounts a little (some online savings are a bit higher than Ally), but perhaps Money Market yields may soon exceed online savings accounts. They are subject to different influences.
Any ideas where this is headed, and are people responding to these changes, and shifting where they park cash? Obviously there are better returns for more risk or less liquidity, but you need a little ready cash parked somewhere.
Thoughts? Can anyone explain what exactly pushes Money Market yields versus what pushes online savings yields?
(No, it didn't break the buck.) After almost a lost decade for Money Market Funds, we are finally up to "triple digit" yields (100 basis points).
In 2 years VMMXX yield has increased from 0.01% to 1.00%, while Ally online savings account has increased from 1.00% to 1.05%.
So the question is, will Money Market Funds again become a non-ridiculous place to place some cash. The yields still lag online savings accounts a little (some online savings are a bit higher than Ally), but perhaps Money Market yields may soon exceed online savings accounts. They are subject to different influences.
Any ideas where this is headed, and are people responding to these changes, and shifting where they park cash? Obviously there are better returns for more risk or less liquidity, but you need a little ready cash parked somewhere.
Thoughts? Can anyone explain what exactly pushes Money Market yields versus what pushes online savings yields?
- White Coat Investor
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Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
I've spent a lot of time thinking about this and was way too slow to move to savings accounts 8 years ago so I was Johnny on the spot moving back this Spring. The bank can pay you whatever it wants. As long as it can loan money for more than it is paying its depositors, it could work out well for the bank. So it is only vaguely related to market rates.
MMFs are basically the market. So you get the market rate. For a short term security like those in a MMF, those rates are highly correlated to the rates the Fed sets to try to regulate the economy (unemployment rate and inflation rate primarily). So when the Fed raises rates as they have lately, a MMF is very responsive to those. But the same thing happens when the Fed lowers rates. The Fed only indirectly gets to set medium and long term rates, but they have exquisite control over short term rates.
MMFs are basically the market. So you get the market rate. For a short term security like those in a MMF, those rates are highly correlated to the rates the Fed sets to try to regulate the economy (unemployment rate and inflation rate primarily). So when the Fed raises rates as they have lately, a MMF is very responsive to those. But the same thing happens when the Fed lowers rates. The Fed only indirectly gets to set medium and long term rates, but they have exquisite control over short term rates.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy |
4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Are you saying that you have already moved from Savings Account (e.g. Ally) to VMMXX for cash?White Coat Investor wrote:I've spent a lot of time thinking about this and was way too slow to move to savings accounts 8 years ago so I was Johnny on the spot moving back this Spring.
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
I moved all my reserve cash from CapitalOne 360 Savings to Prime MM a couple of weeks ago.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
CapitalOne 360 Savings has been stuck at 0.75% for a while, while other online savings are 1%+ and edging up slightly. But the online savings yields haven't budged much, so I wonder what the dynamics are. The online banks might want to enjoy a wider spread, without passing on the interest increases (unless competition makes them increase). I'm totally guessing, so I'd like to hear from an expert.Kenkat wrote:I moved all my reserve cash from CapitalOne 360 Savings to Prime MM a couple of weeks ago.
By contrast, the VMMXX yield seems to be tracking along with the Fed increases, and the Fed Dot Plot, suggests that future increases, are for real, so cash could be earning a few percent in a few years, up from 1bp 2 years ago.
It's easy to move money around, so you can pick whatever happens to be the best interest, but I'm also interested in the theoretical question of what drives yields on Money Market versus online savings.
(Typo edited.)
Last edited by *3!4!/5! on Fri Jun 16, 2017 10:54 pm, edited 1 time in total.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Money market funds yield the actual market, less the expense ratio. Banks pay whatever they decide to pay. They consider things like the competition from other banks, and inertia in their customers. If they keep the rates lower than market rates, and they do not lose too much business because of that, it is more profitable to not raise the rates they pay, or delay such raises.*3!4!/5! wrote:but I'm also interested in the theoretical quation of what drives yields on Money Market versus online savings.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
CapitalOne 360 MONEY MARKET accounts have been paying 1.00% for more than a year for balances > $10k.*3!4!/5! wrote:CapitalOne 360 Savings has been stuck at 0.75% for a while
https://www.capitalone.com/online-money-market-account/
- White Coat Investor
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Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Kind of. I'm in the tax exempt MMF. High tax bracket fortunately/unfortunately.aj76er wrote:Are you saying that you have already moved from Savings Account (e.g. Ally) to VMMXX for cash?White Coat Investor wrote:I've spent a lot of time thinking about this and was way too slow to move to savings accounts 8 years ago so I was Johnny on the spot moving back this Spring.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy |
4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Yep. VMMXX climbing pretty quick. Looked at distrib. That yield was about .7% 1st of year.
Should see 1 mo and 3 month change in yield on 3 mo. US treas.:
http://quotes.wsj.com/bond/BX/TMUBMUSD03M .
Should see 1 mo and 3 month change in yield on 3 mo. US treas.:
http://quotes.wsj.com/bond/BX/TMUBMUSD03M .
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Yes those are a good comparison.MIpreRetirey wrote:Yep. VMMXX climbing pretty quick. Looked at distrib. That yield was about .7% 1st of year.
Should see 1 mo and 3 month change in yield on 3 mo. US treas.:
http://quotes.wsj.com/bond/BX/TMUBMUSD03M .
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Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Discover bank pays 1.1%
As soon as Vanguard pays over Discover, I'm switching back.
As soon as Vanguard pays over Discover, I'm switching back.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
I would need a whole lot of cash for it to make sense chasing 10 or 20 bp. And if I did accumulate that much cash, I probably wouldn't be keeping it in cash!
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
I'm debating on moving my emergency fund from my bank savings at 0.80% to a Vanguard money market fund.White Coat Investor wrote:Kind of. I'm in the tax exempt MMF. High tax bracket fortunately/unfortunately.aj76er wrote:Are you saying that you have already moved from Savings Account (e.g. Ally) to VMMXX for cash?White Coat Investor wrote:I've spent a lot of time thinking about this and was way too slow to move to savings accounts 8 years ago so I was Johnny on the spot moving back this Spring.
I'm trying to decide between the following:
(1) Vanguard Prime Money Market Fund (VMMXX) - 1.00% yield (0.16% ER)
(2) Vanguard Municipal Money Market Fund (VMSXX) - 0.66% yield (0.15% ER)
(3) Vanguard Pennsylvania Municipal Money Market (VPTXX) - 0.60% yield (0.16% ER)
I'm in the 33% federal tax bracket and my state tax is 3.07%. Based on my calculations, it looks like I will get the best after tax returns from the Municipal Money Market Fund. Is that correct? Are there any other issues that I should be considering?
- White Coat Investor
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Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Nope, looks like you're considering everything. I think your math is right too, but didn't actually check it.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy |
4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
They all look to be about the same to me (after tax 0.64%, 0.64%, 0.60%).Boglehawk wrote: I'm in the 33% federal tax bracket and my state tax is 3.07%. Based on my calculations, it looks like I will get the best after tax returns from the Municipal Money Market Fund. Is that correct? Are there any other issues that I should be considering?
Last edited by rkhusky on Fri Jun 16, 2017 8:16 am, edited 1 time in total.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Yes, it would. Nonetheless, I still think I come out slightly ahead with the non-Pa Municipal MM because its yield is 0.06% higher than the PA MM. Again, if I'm wrong about that, please let me know. I realize I'm probably splitting hairs here, but I'm just trying to educate myself on how to calculate after-tax returns.rkhusky wrote:Would the interest in the Tax Exempt MMF be exempt from your state tax? If not, then they look to be about the same.Boglehawk wrote: I'm in the 33% federal tax bracket and my state tax is 3.07%. Based on my calculations, it looks like I will get the best after tax returns from the Municipal Money Market Fund. Is that correct? Are there any other issues that I should be considering?
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Yes, I am interested in that dynamic as well - when I closed the CapitalOne account, it asked why and I selected "found a better rate". I've got to think that at some point CapitalOne will have to raise rates. They did start promoting their money market fund at 1% more aggressively but watching Prime MM's rate rise, I figured it would be a short time before it exceeded that and so I figured I would just move the money once and prefer things to be at Vanguard as a general rule.*3!4!/5! wrote:CapitalOne 360 Savings has been stuck at 0.75% for a while, while other online savings are 1%+ and edging up slightly. But the online savings yields haven't budged much, so I wonder what the dynamics are. The online banks might want to enjoy a wider spread, without passing on the interest increases (unless competition makes them increase). I'm totally guessing, so I'd like to hear from an expert.Kenkat wrote:I moved all my reserve cash from CapitalOne 360 Savings to Prime MM a couple of weeks ago.
By contrast, the VMMXX yield seems to be tracking along with the Fed increases, and the Fed Dot Plot, suggests that future increases, are for real, so cash could be earning a few percent in a few years, up from 1bp 2 years ago.
It's easy to move money around, so you can pick whatever happens to be the best interest, but I'm also interested in the theoretical quation of what drives yields on Money Market versus online savings.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
I edited above while you were responding. Assumed (1) subject to 36% tax, (2) subject to 3% tax, (3) subject to 0% tax. Unless you expect to have a lot in the fund ($100K+), 0.04% difference is not that big. I would look at the historical differences in returns to see how much you might expect the difference to be and the quality/risk of the funds.Boglehawk wrote: Yes, it would.
Last edited by rkhusky on Fri Jun 16, 2017 8:26 am, edited 2 times in total.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
I don't park enough cash to make a difference. If my balance in my AMEX account reached mid 5 figures that would be high.
For larger amounts on the low duration end I like Limited Term TE Admiral. ~ 1.25% after tax.
For larger amounts on the low duration end I like Limited Term TE Admiral. ~ 1.25% after tax.
Stay hydrated; don't sweat the small stuff
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Wouldn't the after tax returns on the two municipal MMs be higher based on the fact that I would not pay taxes on them? I recall seeing somewhere on this forum that after tax returns should be calculated by taking the yield and dividing it by [1 minus the relevant tax rate].rkhusky wrote:They all look to be about the same to me (after tax 0.64%, 0.64%, 0.60%).Boglehawk wrote: I'm in the 33% federal tax bracket and my state tax is 3.07%. Based on my calculations, it looks like I will get the best after tax returns from the Municipal Money Market Fund. Is that correct? Are there any other issues that I should be considering?
Using my tax brackets as an example, wouldn't the after-tax returns for the municipal MMs be calculated as follows:
Pa MM: 0.60/0.64 = 0.94%
Non-Pa MM: 0.66/0.67 = 0.98% [minus 0.0307% state tax] = ~0.95%
Again, please let me know if I'm mistaken about this.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Your after tax return on the PA MM is definitely not 0.94%.Boglehawk wrote: Wouldn't the after tax returns on the two municipal MMs be higher based on the fact that I would not pay taxes on them? I recall seeing somewhere on this forum that after tax returns should be calculated by taking the yield and dividing it by [1 minus the relevant tax rate].
Using my tax brackets as an example, wouldn't the after-tax returns for the municipal MMs be calculated as follows:
Pa MM: 0.60/0.64 = 0.94%
Non-Pa MM: 0.66/0.67 = 0.98% [minus 0.0307% state tax] = ~0.95%
Suppose you have $100 in each of the accounts. In (1) you get $1 in interest, but have to pay 36% tax leaving you $0.64. In (2) you get $0.66 in interest but have to pay 3% tax, leaving $0.64. In (3) you get $0.60 interest and pay no tax.
After tax should be Interest Rate * (1 - Tax Rate).
The ratios you calculated are what you would compare to (1) to see which is better (you shouldn't subtract state in Non-Pa MM). The ratios show that (1) is a little better than (3) and (1) is slightly better than (2) but probably within round error (the ratio is actually 0.985%)
Last edited by rkhusky on Fri Jun 16, 2017 8:53 am, edited 2 times in total.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Several have mentioned that money market reflects "THE" market -- & I'd be curious which market that is. My take is a tad different. Both banks and providers of money market 'funds' (more on that shortly) are reacting to supply & demand.*3!4!/5! wrote:
Thoughts? Can anyone explain what exactly pushes Money Market yields versus what pushes online savings yields?
The term money market is really too broad for detail comparison of where rates are headed. To most people, the underlying differences aren't vital, but the government has regulations that make the drivers drive. There are retail, government, & institutional money market funds; not to be confused with online money market accounts which may have some FDIC protection (I think). Savings accounts (online or not) are different yet. There are differences in what they use the money for, rules for liquidity, credit quality, etc.
Different types of companies (ie banks, providers of revolving credit, etc) have different sources of funds & different uses. The availability of capital & demand for their products is a wide ranging dynamic.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
I never understood why people like this fund at times that it has higher risk and lower return than other choices. Like right now.
You can get 1.25% to 1.35% returns at a few online banks today. FDIC insured.
For money that's already sitting at Vanguard that we don't want to move to a bank, we could buy 3 month Treasury bills. 1.02% return and lower risk than VG MM.
You can get 1.25% to 1.35% returns at a few online banks today. FDIC insured.
For money that's already sitting at Vanguard that we don't want to move to a bank, we could buy 3 month Treasury bills. 1.02% return and lower risk than VG MM.
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Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Well, short term credit risk tends to pay off.
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Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
If you owe AMT, then some of the muni MMF interest is not tax-exempt.Boglehawk wrote:I'm trying to decide between the following:
(1) Vanguard Prime Money Market Fund (VMMXX) - 1.00% yield (0.16% ER)
(2) Vanguard Municipal Money Market Fund (VMSXX) - 0.66% yield (0.15% ER)
(3) Vanguard Pennsylvania Municipal Money Market (VPTXX) - 0.60% yield (0.16% ER)
I'm in the 33% federal tax bracket and my state tax is 3.07%. Based on my calculations, it looks like I will get the best after tax returns from the Municipal Money Market Fund. Is that correct? Are there any other issues that I should be considering?
https://personal.vanguard.com/us/insigh ... tments-AMT
Last year, about 13% of the interest would have been taxable under AMT.
FWIW, Prime and Municipal look about the same for you at the moment. IMO, there's no point in getting worked up over a difference of a basis point or two, especially since yields aren't static in the first place. But if you do expect to pay AMT, I would go with Prime.
My case:
I no longer have or need an emergency fund, but do maintain a small buffer of cash reserves, for situations where I need to keep the wheels of cash flow greased. In the past I've used MMFs or high yield savings accounts for this purpose. But several years ago, I switched to using the Limited Term Tax-Exempt muni fund.
No AMT exposure. No frequent trading limits. (All short term bond funds at VG share that feature.) The dividends go straight to my checking account. The only downsides are of course the fluctuating NAV, and slightly messier tax reporting if/when I make withdrawals.
If MMFs start yielding more after tax for me than Limited Term, I'll be surprised.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Maybe in general, but this fund with lower yield than a bank account won't.Theoretical wrote:Well, short term credit risk tends to pay off.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Ease of use. No cap gains. Generally has less than $10K, so don't care about 0.2% rate difference.lazyday wrote:I never understood why people like this fund at times that it has higher risk and lower return than other choices. Like right now.
You can get 1.25% to 1.35% returns at a few online banks today. FDIC insured.
For money that's already sitting at Vanguard that we don't want to move to a bank, we could buy 3 month Treasury bills. 1.02% return and lower risk than VG MM.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
GS bank (Goldman Sachs) is now paying 1.2% on its online savings account.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
The yields are:Boglehawk wrote: Nonetheless, I still think I come out slightly ahead with the non-Pa Municipal MM because its yield is 0.06% higher than the PA MM. Again, if I'm wrong about that, please let me know. I realize I'm probably splitting hairs here, but I'm just trying to educate myself on how to calculate after-tax returns.
1.00% - Prime MM
0.66% - Muni MM
0.60% - PA Muni MM
As already mentioned, in general, after-tax yield = pre-tax yield * (1-tax rate). Often people express it the other way around, converting muni yield to taxable-equivalent yield, in which case TEY = muni yield / (1 - tax rate). These formulas work for national muni funds, since the federal tax rate is all that's involved.
For state muni funds, the formula is different depending on whether or not you itemize your deductions. If you itemize, TEY is lower because the deduction for state tax lowers the net federal tax applied to your fully taxable yields.
If you don't itemize, TEY for state muni fund = muni yield / (1 - ft - st), where ft = federal tax rate and st = state tax rate. If you itemize, TEY = muni yield / (1 - ft - st + ft*st), which also can be written as TEY = muni yield / ( (1-ft)*(1-st) ). Using these formulas, the TEYs are:
1.00% - Prime MM
0.99% - Muni MM
0.94% - PA MM, no itemize (standard deduction)
0.92% - PA MM, itemize deductions
If you want to express yields as after-tax yields instead:
0.65% - Prime MM, itemize deductions
0.64% - Prime MM, standard deduction
0.64% - Muni MM
0.60% - PA MM
So if you itemize deductions, which you probably do at those tax rates, Prime MM is just a hair better than the Muni MM, and if you don't itemize they are the same to two decimal places. The PA Muni MM has the lowest taxable-equivalent yield whether you itemize or not.
None of this factors in the AMT issue raised by House Blend. Also, these rates can change daily, so things could be different tomorrow (or a week from now).
Kevin
If I make a calculation error, #Cruncher probably will let me know.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Can you please name some of the online banks that have 1.25-1.35% rates?lazyday wrote:I never understood why people like this fund at times that it has higher risk and lower return than other choices. Like right now.
You can get 1.25% to 1.35% returns at a few online banks today. FDIC insured.
For money that's already sitting at Vanguard that we don't want to move to a bank, we could buy 3 month Treasury bills. 1.02% return and lower risk than VG MM.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Thanks for breaking this down, Kevin. I really appreciate it.Kevin M wrote:The yields are:Boglehawk wrote: Nonetheless, I still think I come out slightly ahead with the non-Pa Municipal MM because its yield is 0.06% higher than the PA MM. Again, if I'm wrong about that, please let me know. I realize I'm probably splitting hairs here, but I'm just trying to educate myself on how to calculate after-tax returns.
1.00% - Prime MM
0.66% - Muni MM
0.60% - PA Muni MM
As already mentioned, in general, after-tax yield = pre-tax yield * (1-tax rate). Often people express it the other way around, converting muni yield to taxable-equivalent yield, in which case TEY = muni yield / (1 - tax rate). These formulas work for national muni funds, since the federal tax rate is all that's involved.
For state muni funds, the formula is different depending on whether or not you itemize your deductions. If you itemize, TEY is lower because the deduction for state tax lowers the net federal tax applied to your fully taxable yields.
If you don't itemize, TEY for state muni fund = muni yield / (1 - ft - st), where ft = federal tax rate and st = state tax rate. If you itemize, TEY = muni yield / (1 - ft - st + ft*st), which also can be written as TEY = muni yield / ( (1-ft)*(1-st) ). Using these formulas, the TEYs are:
1.00% - Prime MM
0.99% - Muni MM
0.94% - PA MM, no itemize (standard deduction)
0.92% - PA MM, itemize deductions
If you want to express yields as after-tax yields instead:
0.65% - Prime MM, itemize deductions
0.64% - Prime MM, standard deduction
0.64% - Muni MM
0.60% - PA MM
So if you itemize deductions, which you probably do at those tax rates, Prime MM is just a hair better than the Muni MM, and if you don't itemize they are the same to two decimal places. The PA Muni MM has the lowest taxable-equivalent yield whether you itemize or not.
None of this factors in the AMT issue raised by House Blend. Also, these rates can change daily, so things could be different tomorrow (or a week from now).
Kevin
I do itemize my taxes and am subject to AMT. Based on this, it looks like Prime MM will work best for me given the current yields. Because these numbers are so close, it probably doesn't make much of a difference one way or the other. Nonetheless, thanks again for explaining how these calculations work.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Still like my reward checking at 3.09% for 12 debits (30 seconds of online $1 purchases) per month.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Savings Account Rates | DepositAccounts.com. I don't see 1.35%, but I see three at 1.30% and three at 1.25%.Munir wrote: Can you please name some of the online banks that have 1.25-1.35% rates?
You can get 1.35% for minimum of $25K in a no-penalty 11-month CD at Ally Bank. You must wait six days to do early withdrawals, but after that it's essentially a savings account, except that you can't do partial withdrawals. I opened two @$25K each this week.
Kevin
If I make a calculation error, #Cruncher probably will let me know.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Makes sense.rkhusky wrote:Generally has less than $10K, so don't care about 0.2% rate difference.
Take a look at https://www.depositaccounts.com/blog/ba ... ts-survey/Munir wrote:Can you please name some of the online banks that have 1.25-1.35% rates?
I haven't looked into them, but there are a few that don't seem to be just promo rates.
Ally also has 1.35% on an 11 month CD with no penalties for early withdrawal, but not for an IRA and has $25000 minimum.Self-Help Federal Credit Union ... 1.31% ($500) Money Market - Account review
DollarSavingsDirect 1.30% (no min) Dollar Savings Account - Account review
BankPurely 1.30% ($1 min) SavingPurely - Account review
ableBanking 1.30% ($250 min) Money Market Savings - Account review
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
I was searching for regular savings accounts from a reputable bank with no minimum and no penalties (and not CDs). The highest rate I had seen was GS Bank (Goldman Sachs) at 1.2%. I apologize for not being clear in my question.Munir wrote:Can you please name some of the online banks that have 1.25-1.35% rates?lazyday wrote:I never understood why people like this fund at times that it has higher risk and lower return than other choices. Like right now.
You can get 1.25% to 1.35% returns at a few online banks today. FDIC insured.
For money that's already sitting at Vanguard that we don't want to move to a bank, we could buy 3 month Treasury bills. 1.02% return and lower risk than VG MM.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
If you haven't looked at ally in a while, they now allow you to close a cd online before maturity, and it seems that the funds are available immediately. The 11 month has no penalty for early withdrawal.
But of course you can't make autopayments from it or write checks from it, so it's not really a replacement for a checking or savings account.
But of course you can't make autopayments from it or write checks from it, so it's not really a replacement for a checking or savings account.
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Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
deleted
Last edited by weltschmerz on Tue Jan 01, 2019 1:04 pm, edited 1 time in total.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Because there is a very good chance that in an environment where rates are rising, the yield on Prime MM will be above 1.02% (T-bills) or 1.2% (online banks) in 3 months, so you are back to chasing rates.lazyday wrote:I never understood why people like this fund at times that it has higher risk and lower return than other choices. Like right now.
You can get 1.25% to 1.35% returns at a few online banks today. FDIC insured.
For money that's already sitting at Vanguard that we don't want to move to a bank, we could buy 3 month Treasury bills. 1.02% return and lower risk than VG MM.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
I just did this as well. Thanks for sharing!Kevin M wrote: I opened two @$25K each this week.
Kevin
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
I was typing at the same time as you and didn't see your reply earlier.Kevin M wrote:Savings Account Rates | DepositAccounts.com. I don't see 1.35%, but I see three at 1.30% and three at 1.25%.Munir wrote: Can you please name some of the online banks that have 1.25-1.35% rates?
You can get 1.35% for minimum of $25K in a no-penalty 11-month CD at Ally Bank. You must wait six days to do early withdrawals, but after that it's essentially a savings account, except that you can't do partial withdrawals. I opened two @$25K each this week.
Kevin
Yes, that's the 1.35 I was thinking of. And my "not a savings account" wasn't meant for you I figure it's pretty close to a savings account.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Different animals entirely. I'll probably break at least one of the CDs within 2-3 months, and maybe both. That would result in a negative or 0% yield with the Barclays CD, while it will still be a 1.35% APY with the Ally CD. Breaking the Barclays CD anytime before maturity results in a lower yield--even at 11 months you end up with an APY of 1.02%, so even less than a savings account: CD Early Withdrawal Penalty Calculator.The Dan wrote:Here's another option: You can get 1.4% APY at Barclays with a 12-month CD, no minimum, and the penalty for early withdrawal is only 3-months interest.Kevin M wrote: You can get 1.35% for minimum of $25K in a no-penalty 11-month CD at Ally Bank. You must wait six days to do early withdrawals, but after that it's essentially a savings account, except that you can't do partial withdrawals. I opened two @$25K each this week.
Kevin
The Ally no-penalty CD is essentially a cash equivalent--i.e., no term risk--but with a minimum purchase requirement ($25K to get the good rate), a 6-day no-withdrawal period, and an all-or-none withdrawal policy. You can do just about as well at a few other banks with just a savings account (without the constraints), but if you already have an account at Ally, opening up one or two of these CDs is easier and faster than opening another account and moving money between banks.
Kevin
If I make a calculation error, #Cruncher probably will let me know.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
To keep things in perspective, the difference in interest between 1.05% and 1.35% APY on $50K for 60 days is only about $24. But it only takes about 5 minutes to open the CD online (or two if you want to open two at the same time), so that's about $292/hour. Well, maybe another 5 minutes to break the CD, so let's say $146/hour.
Kevin
Kevin
If I make a calculation error, #Cruncher probably will let me know.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
From where did you get the $50K? Was it sitting in cash at Ally?Kevin M wrote:To keep things in perspective, the difference in interest between 1.05% and 1.35% APY on $50K for 60 days is only about $24. But it only takes about 5 minutes to open the CD online (or two if you want to open two at the same time), so that's about $292/hour. Well, maybe another 5 minutes to break the CD, so let's say $146/hour.
Kevin
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Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
By the way, given that you do pay AMT, it is highly likely that your Federal marginal tax rate is *not* 33%. Best to play with some tax software to see, for example, what it does to your Federal tax bill if you add, say $100, of bank interest to last year's tax return.Boglehawk wrote:I do itemize my taxes and am subject to AMT. Based on this, it looks like Prime MM will work best for me given the current yields. Because these numbers are so close, it probably doesn't make much of a difference one way or the other. Nonetheless, thanks again for explaining how these calculations work.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
Yes, it was sitting in cash earning 1.05%, and now it is sitting in cash earning 1.35%. As implied in my comment that I'll likely break one or both $25K CDs in 2-3 months, I expect to be using this cash within that timeframe (related to real estate transactions).rkhusky wrote:From where did you get the $50K? Was it sitting in cash at Ally?Kevin M wrote:To keep things in perspective <snip>
I also have a much larger amount in a couple of bond funds (CA int-term and long-term muni funds) that also will likely be mostly if not fully liquidated in that timeframe, so it's not as if I'm avoiding term risk altogether for the funds that will most likely be used in the near term.
Kevin
If I make a calculation error, #Cruncher probably will let me know.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
This isn't like you. These must date from the Whitney scare and involve a substantial (for bonds) gain, whose realization in excess to the actual outlay need you'd regret as an unforced error; otherwise this is pure nickel on hot unrolled asphalt.Kevin M wrote:I also have a much larger amount in a couple of bond funds (CA int-term and long-term muni funds) that also will likely be mostly if not fully liquidated in that timeframe, so it's not as if I'm avoiding term risk altogether for the funds that will most likely be used in the near term.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
It is totally like me! I've maintained an allocation of about 30% of fixed income to bond funds even after I shifted most fixed income to direct CDs, starting about 6.5 years ago, but bond funds are down to about 25% of fixed income at this point. These two CA muni funds are part of that 25%.ofckrupke wrote:This isn't like you. These must date from the Whitney scare and involve a substantial (for bonds) gain, whose realization in excess to the actual outlay need you'd regret as an unforced error; otherwise this is pure nickel on hot unrolled asphalt.Kevin M wrote:I also have a much larger amount in a couple of bond funds (CA int-term and long-term muni funds) that also will likely be mostly if not fully liquidated in that timeframe, so it's not as if I'm avoiding term risk altogether for the funds that will most likely be used in the near term.
My personal rate of return on these two funds over the last five years is 3.6%, so better than my CDs (in return for taking the term risk and some credit risk). Of course the term risk showed up to some extent with fairly big losses (as bond funds go) in November 2016, and to a much lesser extent in September and October, but much of that has been recovered since then. So my 1-year personal rate of return on these two funds is 1.2%--still better than cash, especially considering the tax-free dividends.
Kevin
If I make a calculation error, #Cruncher probably will let me know.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
I don't care so much about your past results as your approach now to likelihood and uncertainty in the outlay requirements of your near future. The mismatch of duration of funds earmarked for an outlay to the anticipated time of that outlay seems particularly severe in this case.
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
House Blend:House Blend wrote:By the way, given that you do pay AMT, it is highly likely that your Federal marginal tax rate is *not* 33%. Best to play with some tax software to see, for example, what it does to your Federal tax bill if you add, say $100, of bank interest to last year's tax return.Boglehawk wrote:I do itemize my taxes and am subject to AMT. Based on this, it looks like Prime MM will work best for me given the current yields. Because these numbers are so close, it probably doesn't make much of a difference one way or the other. Nonetheless, thanks again for explaining how these calculations work.
I did what you recommended (added $100 of interest income to my 2016 tax return) and my refund dropped by $35. I assume that means that my marginal tax bracket (when considering AMT) is 35%. Is that correct?
Re: Vanguard Prime Money Market Fund (VMMXX) breaks 1.00 (% not $)
You don't have the entire picture, and this is taking is too far off topic, so let's bring this sub-thread to a close. But your point about matching duration of assets to liabilities is a good one. Suffice it to say that that has been considered.ofckrupke wrote:I don't care so much about your past results as your approach now to likelihood and uncertainty in the outlay requirements of your near future. The mismatch of duration of funds earmarked for an outlay to the anticipated time of that outlay seems particularly severe in this case.
Kevin
If I make a calculation error, #Cruncher probably will let me know.