Vanguard Treasury vs Federal MoneyMarket

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woolie
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Vanguard Treasury vs Federal MoneyMarket

Post by woolie » Sat Jan 12, 2019 10:49 am

Any other Treasury MM owners out there? I use it for my emergency fund, even though I have WAY less than the $50k minimum. How did this happen? When I first started investing at Vanguard in the 90s, I went looking for the most conservative fund they had, which was Treasury moneymarket. At the time the minimum was $3k, I scraped that together over several months and felt like a boss when I could finally buy into that fund. In the aftermath of the '08 crisis Vanguard put trading limits in place, which was understandable but made it less attractive as a place to park cash. I moved the bulk of my money elsewhere, but kept a small balance for sentimental reasons.
After Vanguard lifted the trading limits and made it a liquid again, I'm keeping my emergency money there and essentially using it as a settlement account. This is kind of odd because Vanguard set me up with a Federal MoneyMarket settlement account when I converted to a brokerage account.

As far as I can tell, the difference between the Treasury and Federal moneymarket funds is negligible. Treasury holds strictly t-bills, Federal is a mix of t-bills and other agency debt but it is all backed by full faith of US Gov't. Federal has slightly higher yield, Treasury has slightly lower expenses. But the differences are tiny. The only meaningful diffference I could find is that the Federal fund is much larger than the Treasury, which is understandable given that Treasury has a $50k minimum and Federal is the default settlement fund for all their brokerage customers.

Questions:
Is there something attractive about the Federal fund that I'm missing?
Am I doing something by bypassing the settlement fund that Vanguard has set up for me?
Is anyone else legacy owners of the Treasury moneymarket fund like me, and if so how are you using it?

sport
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Re: Vanguard Treasury vs Federal MoneyMarket

Post by sport » Sat Jan 12, 2019 11:27 am

If you are subject to state income taxes, the treasury fund has an advantage over the federal fund. As I recall, the treasury fund is backed by the full faith of the US treasury. However, I believe the federal fund does not have that status, and therefore is slightly more risky.

Blake7
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Re: Vanguard Treasury vs Federal MoneyMarket

Post by Blake7 » Sat Jan 12, 2019 11:37 am

I am a legacy owner, similar to your situation. I still have the VTMM in each of our Roths with about $50 in each to keep it open, but I don’t really need them. I use it for our emergency fund in our taxable, and transact directly to/from our bank account. I prefer the VTMM over the Federal in taxable as it’s 100% state tax-free, v. about 85% tax-free in CA. I consider the VTMM the next best thing to a FDIC account in terms of safety.

arf30
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Re: Vanguard Treasury vs Federal MoneyMarket

Post by arf30 » Sat Jan 12, 2019 12:00 pm

woolie wrote:
Sat Jan 12, 2019 10:49 am
Any other Treasury MM owners out there? I use it for my emergency fund, even though I have WAY less than the $50k minimum. How did this happen?
It's just a minimum initial purchase requirement, once you buy in you can go below that amount. Standard for pretty much any fund with a minimum.
Last edited by arf30 on Sat Jan 12, 2019 12:03 pm, edited 1 time in total.

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woolie
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Re: Vanguard Treasury vs Federal MoneyMarket

Post by woolie » Sat Jan 12, 2019 12:03 pm

Thanks! I totally blanked on the state income tax factor. Being a resident of MA you'd think I would be aware of that :oops:
In any case, it's good to know there's a rational reason for me to use this fund, besides the kick I get from feeling like I sneaked into a fancy club through a side door.

ResearchMed
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Re: Vanguard Treasury vs Federal MoneyMarket

Post by ResearchMed » Sat Jan 12, 2019 12:03 pm

woolie wrote:
Sat Jan 12, 2019 10:49 am
Any other Treasury MM owners out there? I use it for my emergency fund, even though I have WAY less than the $50k minimum. How did this happen? When I first started investing at Vanguard in the 90s, I went looking for the most conservative fund they had, which was Treasury moneymarket. At the time the minimum was $3k, I scraped that together over several months and felt like a boss when I could finally buy into that fund. In the aftermath of the '08 crisis Vanguard put trading limits in place, which was understandable but made it less attractive as a place to park cash. I moved the bulk of my money elsewhere, but kept a small balance for sentimental reasons.
After Vanguard lifted the trading limits and made it a liquid again, I'm keeping my emergency money there and essentially using it as a settlement account. This is kind of odd because Vanguard set me up with a Federal MoneyMarket settlement account when I converted to a brokerage account.

As far as I can tell, the difference between the Treasury and Federal moneymarket funds is negligible. Treasury holds strictly t-bills, Federal is a mix of t-bills and other agency debt but it is all backed by full faith of US Gov't. Federal has slightly higher yield, Treasury has slightly lower expenses. But the differences are tiny. The only meaningful diffference I could find is that the Federal fund is much larger than the Treasury, which is understandable given that Treasury has a $50k minimum and Federal is the default settlement fund for all their brokerage customers.

Questions:
Is there something attractive about the Federal fund that I'm missing?
Am I doing something by bypassing the settlement fund that Vanguard has set up for me?
Is anyone else legacy owners of the Treasury moneymarket fund like me, and if so how are you using it?
We weren't at Vanguard in 2008.

What were the "trading limits" that Vanguard imposed on the Treasury fund at that time?

My understanding is that the Federal MM is the "retail" version that has some protections against gates and fees that don't exist with the other MM funds.

RM
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pascalwager
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Re: Vanguard Treasury vs Federal MoneyMarket

Post by pascalwager » Sat Jan 12, 2019 12:25 pm

I use the Treasury MM fund because it's state-tax free and is the safest of the MM funds. I keep a few years living expenses in this fund.

My main concern is: What if the stock markets shut down for a few months during a financial crisis. Will I have access to the money in the Treasury MM fund? Maybe someone here knows the answer.
Last edited by pascalwager on Sat Jan 12, 2019 1:55 pm, edited 1 time in total.
52/48 stocks/money market

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woolie
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Re: Vanguard Treasury vs Federal MoneyMarket

Post by woolie » Sat Jan 12, 2019 12:29 pm

Blake7 wrote:
Sat Jan 12, 2019 11:37 am
I am a legacy owner, similar to your situation. I still have the VTMM in each of our Roths with about $50 in each to keep it open, but I don’t really need them. I use it for our emergency fund in our taxable, and transact directly to/from our bank account. I prefer the VTMM over the Federal in taxable as it’s 100% state tax-free, v. about 85% tax-free in CA. I consider the VTMM the next best thing to a FDIC account in terms of safety.
:sharebeer

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woolie
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Re: Vanguard Treasury vs Federal MoneyMarket

Post by woolie » Sat Jan 12, 2019 1:01 pm

pascalwager wrote:
Sat Jan 12, 2019 12:25 pm
I use the Treasury MM fund because it's state-tax free and is the safest of the MM funds. I keep a few years living expenses in this fund.

My main concern is: What if the stock markets shut down for a few months during a financial crisis. Will I have excess to the money in the Treasury MM fund? Maybe someone here knows the answer.
Can't predict the future, but based on the past it doesn't seem like you have to worry. In the last crisis, Vanguard put limits on frequent trading (out then back in) but did not put any blocks on withdrawals from this or any other of their moneymarket funds (if I recall correctly).

Finally, a multi-month trading halt is completely unprecedented. Even after 9/11, trading resumed in a week.

Blake7
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Re: Vanguard Treasury vs Federal MoneyMarket

Post by Blake7 » Sat Jan 12, 2019 1:21 pm

woolie wrote:
Sat Jan 12, 2019 1:01 pm
pascalwager wrote:
Sat Jan 12, 2019 12:25 pm
I use the Treasury MM fund because it's state-tax free and is the safest of the MM funds. I keep a few years living expenses in this fund.

My main concern is: What if the stock markets shut down for a few months during a financial crisis. Will I have excess to the money in the Treasury MM fund? Maybe someone here knows the answer.
Can't predict the future, but based on the past it doesn't seem like you have to worry. In the last crisis, Vanguard put limits on frequent trading (out then back in) but did not put any blocks on withdrawals from this or any other of their moneymarket funds (if I recall correctly).
That sounds right. By closing the Treasury MM to new deposits back then, I believe Vanguard was trying to slow the exodus to safety from their equity funds which were being negatively impacting by the outgoing volume.

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