[Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

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Billavoider
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[Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Billavoider »

[Thread merged into here, see below. Title was "Vanguard Treasury Money Market Fund reopens to new investors" --admin LadyGeek]

Found this posted at MFO:

https://www.sec.gov/Archives/edgar/data ... 6779d1.htm

497 1 f6779d1.htm TREASURYMM497

(VUSXX)

Vanguard Treasury Money Market Fund

Supplement Dated August 27, 2020, to the Prospectus and Summary Prospectus Dated December 20, 2019

Effective immediately, Vanguard Treasury Money Market Fund is re-opened to all investors without limitations.



© 2020 The Vanguard Group, Inc. All rights reserved.

PS 030C 082020

Vanguard Marketing Corporation, Distributor.
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Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by FrugalInvestor »

I've used Prime Money Market for my short-term holdings for many years. I've moved much of that to no-penalty CDs and online savings more recently but still keep some at Vanguard for quick access. I wonder what the best Vanguard choice(s) will be now?

Announcement here.....
https://investornews.vanguard/changes-t ... nd-lineup/

Intro from announcement....
To give investors the best chance for investment success, we continuously assess our fund lineup. In certain instances and after careful deliberation, we find that even our most well-known funds need to evolve to best serve our clients.

Today, we’re announcing some changes to our taxable money market lineup that aim to better support your needs for principal preservation, liquidity, and competitive yields. We’ve observed and navigated two market crises in 12 years. With that as a backdrop, we believe it’s better to provide clients with a highly competitive yield by lowering expenses on a secure government portfolio rather than incurring risk in the prime market.
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Vanguard Prime Money Market changes

Post by Chrono Triggered »

[Merged into the existing thread - mod oldcomputerguy]

"Vanguard Prime Money Market Fund will change its investment approach and be renamed Vanguard Cash Reserves Federal Money Market Fund. When this change goes into effect in late September 2020, the fund will invest almost exclusively in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash. While the fund has historically been managed more conservatively than its peer group, this change further lowers its risk.

Effective today, the minimum initial investment for the fund’s Admiral™ Shares is being lowered from $5 million to $3,000, making more than 1 million shareholders eligible for reduced expenses (0.10% for Admiral Shares compared with 0.16% for Investor Shares)."

https://investornews.vanguard/changes-t ... nd-lineup/
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Prime Money Market Changing to Cash Reserves Federal Money Market

Post by adestefan »

[Merged here - mod oldcomputerguy]

Prime is moving from a 33% tilt to a full cash, federal, and federal collateralized fund. Change will occur in September.

Other changes include lower Admiral limit to $3000. You can move now or it will automatically happen over the next 6 months. However, there’s no check writing on Admiral class funds.

https://investornews.vanguard/changes-t ... nd-lineup/
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Re: Prime Money Market Changing to Cash Reserves Federal Money Market

Post by greg24 »

What does this mean for the little guy? I used to like having checkwriting on my PMM account, but we have rarely used it, so we'll drop it for admiral shares.

Instead of just going to the new Cash Reserves fund, should I consider one of their other MM funds? The Treasury MM Fund VUSXX is reopening.
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by Every things free »

I just received the notice and made the switch today.

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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by arcticpineapplecorp. »

also this:
Reopening the Treasury Money Market Fund

Vanguard Treasury Money Market Fund (VUSXX) has reopened to new investors, also effective today. The fund was closed in April, during a period of heightened volatility and increased interest in U.S. Treasury investments, to protect existing investors from an accelerated reduction in the fund’s yield.

Because of changes in the market environment, Vanguard believes it’s now in the best interests of shareholders to reopen the fund.

source: https://investornews.vanguard/changes-t ... nd-lineup/
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by PhooBooKhoo »

If I convert to the admiral shares today will I lose my interest gained for the month? I won't be on record for VMMXX at the end of the month, and will only be on record for the VMRXX for a day or two.
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by ResearchMed »

Chrono Triggered wrote: Thu Aug 27, 2020 9:35 am "Vanguard Prime Money Market Fund will change its investment approach and be renamed Vanguard Cash Reserves Federal Money Market Fund. When this change goes into effect in late September 2020, the fund will invest almost exclusively in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash. While the fund has historically been managed more conservatively than its peer group, this change further lowers its risk.
arcticpineapplecorp. wrote: Thu Aug 27, 2020 9:58 am also this:
Reopening the Treasury Money Market Fund

Vanguard Treasury Money Market Fund (VUSXX) has reopened to new investors, also effective today. The fund was closed in April, during a period of heightened volatility and increased interest in U.S. Treasury investments, to protect existing investors from an accelerated reduction in the fund’s yield.

Because of changes in the market environment, Vanguard believes it’s now in the best interests of shareholders to reopen the fund.

source: https://investornews.vanguard/changes-t ... nd-lineup/
So how different are the "new improved" Vanguard Cash Reserves Federal MM fund and the Treasury MM fund, especially in terms of safety?

I doubt the returns will be much different, and especially not when it's all so close to the floor.

RM
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by arcticpineapplecorp. »

ResearchMed wrote: Thu Aug 27, 2020 10:14 am
Chrono Triggered wrote: Thu Aug 27, 2020 9:35 am "Vanguard Prime Money Market Fund will change its investment approach and be renamed Vanguard Cash Reserves Federal Money Market Fund. When this change goes into effect in late September 2020, the fund will invest almost exclusively in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash. While the fund has historically been managed more conservatively than its peer group, this change further lowers its risk.
arcticpineapplecorp. wrote: Thu Aug 27, 2020 9:58 am also this:
Reopening the Treasury Money Market Fund

Vanguard Treasury Money Market Fund (VUSXX) has reopened to new investors, also effective today. The fund was closed in April, during a period of heightened volatility and increased interest in U.S. Treasury investments, to protect existing investors from an accelerated reduction in the fund’s yield.

Because of changes in the market environment, Vanguard believes it’s now in the best interests of shareholders to reopen the fund.

source: https://investornews.vanguard/changes-t ... nd-lineup/
So how different are the "new improved" Vanguard Cash Reserves Federal MM fund and the Treasury MM fund, especially in terms of safety?

I doubt the returns will be much different, and especially not when it's all so close to the floor.

RM
agreed, but haven't compared the two funds (can't until they launch the new one!) but perhaps someone will do that. Or we can revisit later on.
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Vanguard Announces Changes to Prime Money Market

Post by retiringwhen »

[Merged into the existing discussion -- mod oldcomputerguy]

I just got an email and also a link to the Vanguard site describing significant changes to the Vanguard Prime Money Market.

The TLDR version:
  • Prime Money Market Admiral Shares (VMRXX) will have its minimum investment lowered to $3,000 from $5,000,000. This is effectively the same as done with all the Index funds in the past including share class conversions.
  • Prime Money Market Fund will be renamed Vanguard Cash Reserves Federal Money Market Fund along with a change in investment strategy that will no longer meaningfully invest in commercial paper.
  • It is not clear just what differentiates this revised fund from the existing Settlement Account / Vanguard Federal Money Market Fund.
  • Check-writing privileges will NOT be extended to the Admiral Fund shares.
  • Vanguard Treasury Money Market (VUSXX) is re-opened to new investors but with no changes to minimum investments effectively immediately.

Changes to our taxable money market fund lineup
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by bogledogle87 »

I have used VMMXX for my emergency fund for years, because it typically had a 0.25% premium over the Settlement Fund. Obviously, we are in near-zero times right now, but it seems that premium will be erased.

Is there any advantage to holding the Prime Fund over the Settlement going forward?
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Re: Prime Money Market Changing to Cash Reserves Federal Money Market

Post by Broken Man 1999 »

greg24 wrote: Thu Aug 27, 2020 9:46 am What does this mean for the little guy? I used to like having checkwriting on my PMM account, but we have rarely used it, so we'll drop it for admiral shares.

Instead of just going to the new Cash Reserves fund, should I consider one of their other MM funds? The Treasury MM Fund VUSXX is reopening.
Maybe consider just using your settlement account.

When Vanguard started using Vanguard Federal Money Market fund as the settlement fund, I closed all our Prime Money Market funds. I have never been one to have a lot of dollars in any MMF, or savings accounts.

Our settlement fund is just a portal we use to funnel $$ to/from investments to/from our credit union checking accounts.

I have checkwriting on the Vanguard Federal Money Market Fund in my Traditional IRA, with Vanguard Short-Term Treasury Index Fund being my alternative redemption fund. The
Vanguard Short-Term Treasury Index Fund is as close to cash as we have, and it is close enough for us.

I write very few checks, but did use the checkwriting when a family member needed more money than I had in my checking account, and I didn't have time to sell something and move the proceeds to my checking account. So, it is handy to have access to a large amount of $$$ quickly. I have also written large checks for remodeling projects from my Vanguard account.

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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by sport »

arcticpineapplecorp. wrote: Thu Aug 27, 2020 10:27 am
ResearchMed wrote: Thu Aug 27, 2020 10:14 am
So how different are the "new improved" Vanguard Cash Reserves Federal MM fund and the Treasury MM fund, especially in terms of safety?

I doubt the returns will be much different, and especially not when it's all so close to the floor.

RM
agreed, but haven't compared the two funds (can't until they launch the new one!) but perhaps someone will do that. Or we can revisit later on.
The question also applies to the Federal MM fund. Vanguard will now have 3 "government type" MM funds. It will be interesting to compare the differences. Another question is whether or not this fund will still be subject to gates and withdrawal restrictions if things get really bad.

A related question is what happens to this fund if/when interest rates go back to more normal levels. By changing the name, it seems that this is intended to be a permanent change.
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by A440 »

I switched to Admiral before I learned about the inability to write checks on the upgrade.
I called the Flagship customer service number today. The rep didn't know about the change and wanted to learn how I received the information so she could pass it on to her team. :confused
Wait??? What???
Reminds me of the line from Cool Hand Luke, "What we've got here, is failure to communicate".
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by Lastrun »

sport wrote: Thu Aug 27, 2020 10:45 am
The question also applies to the Federal MM fund. Vanguard will now have 3 "government type" MM funds. It will be interesting to compare the differences. Another question is whether or not this fund will still be subject to gates and withdrawal restrictions if things get really bad.
This is a good question. Last time I checked, the Federal MM had no gates, and Prime MM had a possible gate.

So going forward, if there is not much difference between Prime and Federal, and Prime has no check writing and a possible gate, why would I use it?

I guess we will have to wait and see what the return delta is going forward.
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by Robot Monster »

PhooBooKhoo wrote: Thu Aug 27, 2020 10:03 am If I convert to the admiral shares today will I lose my interest gained for the month? I won't be on record for VMMXX at the end of the month, and will only be on record for the VMRXX for a day or two.
You don't lose interest when you sell shares mid-month.
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by jeffyscott »

sport wrote: Thu Aug 27, 2020 10:45 am
arcticpineapplecorp. wrote: Thu Aug 27, 2020 10:27 am
ResearchMed wrote: Thu Aug 27, 2020 10:14 am
So how different are the "new improved" Vanguard Cash Reserves Federal MM fund and the Treasury MM fund, especially in terms of safety?

I doubt the returns will be much different, and especially not when it's all so close to the floor.

RM
agreed, but haven't compared the two funds (can't until they launch the new one!) but perhaps someone will do that. Or we can revisit later on.
The question also applies to the Federal MM fund. Vanguard will now have 3 "government type" MM funds. It will be interesting to compare the differences. Another question is whether or not this fund will still be subject to gates and withdrawal restrictions if things get really bad.

A related question is what happens to this fund if/when interest rates go back to more normal levels. By changing the name, it seems that this is intended to be a permanent change.
Not sure why they need another way to get close to a 0% yield by investing "almost exclusively in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash".

The Federal Money Market Fund already does exactly that: "The fund invests at least 99.5% of its total assets in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash (collectively, government securities).

:confused
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by RetiredInTheWest »

We don't write checks out of our Prime anyway, so just made the switch to Admiral too.
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Re: Prime Money Market Changing to Cash Reserves Federal Money Market

Post by FrugalInvestor »

adestefan wrote: Thu Aug 27, 2020 9:36 am [Merged here - mod oldcomputerguy]

Prime is moving from a 33% tilt to a full cash, federal, and federal collateralized fund. Change will occur in September.

Other changes include lower Admiral limit to $3000. You can move now or it will automatically happen over the next 6 months. However, there’s no check writing on Admiral class funds.

https://investornews.vanguard/changes-t ... nd-lineup/
Well that's disappointing because I always like lower expenses but one of the reasons I keep a reserve at Vanguard is to be able to write a larger check on short notice in the event my checking account balance is low. I use my checking as a pass-thru primarily for bill-pay so don't keep much money there.
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by Kenkat »

A440 wrote: Thu Aug 27, 2020 10:48 am I switched to Admiral before I learned about the inability to write checks on the upgrade.
I called the Flagship customer service number today. The rep didn't know about the change and wanted to learn how I received the information so she could pass it on to her team. :confused
Wait??? What???
Reminds me of the line from Cool Hand Luke, "What we've got here, is failure to communicate".
Happening at a Megacorp near you...

Call Center Manager: It would be helpful if could get notified of changes before the customer.
Megacorp Senior Management: Wait, what? We have a call center?

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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by sycamore »

Robot Monster wrote: Thu Aug 27, 2020 11:05 am
PhooBooKhoo wrote: Thu Aug 27, 2020 10:03 am If I convert to the admiral shares today will I lose my interest gained for the month? I won't be on record for VMMXX at the end of the month, and will only be on record for the VMRXX for a day or two.
You don't lose interest when you sell shares mid-month.
Correct. Each money market fund declares dividends daily and pays monthly.
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by Wind_Reaver »

FrugalInvestor wrote: Thu Aug 27, 2020 9:35 am Today, we’re announcing some changes to our taxable money market lineup that aim to better support your needs for principal preservation, liquidity, and competitive yields. We’ve observed and navigated two market crises in 12 years. With that as a backdrop, we believe it’s better to provide clients with a highly competitive yield by lowering expenses on a secure government portfolio rather than incurring risk in the prime market.
Almost four years removed from Money Market Reform and Vanguard finally catching up to feedback. Better late than never. Competitors expanded cash management products years ago.
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by sycamore »

Vanguard filed a supplement to the prospectus with the SEC. It's not too long so copying it all here.
Vanguard Prime Money Market Fund

Supplement Dated August 27, 2020, to the Prospectus and Summary Prospectus Dated December 20, 2019

Change in Strategy, Name, and Designation
The board of trustees (the “Board”) of Vanguard Prime Money Market Fund (the “Fund”) has approved changes to the Fund’s investment strategy and name, and a change in the Fund’s designation to a “government” money market fund. These changes will be effective on or about September 29, 2020.

The Fund is currently designated as a “retail” money market fund. The Fund invests primarily in high-quality, short-term money market instruments, including certificates of deposit, banker’s acceptances, commercial paper, Eurodollar and Yankee obligations, and other money market securities, including securities issued by the U.S. government or its agencies and instrumentalities. The Fund invests more than 25% of its assets in the financial services industry.

The Board has determined that it is in the best interests of the Fund and its shareholders to change the Fund’s designation to a “government” money market fund. Pursuant to Rule 2a-7 under the Investment Company Act of 1940, a government money market fund is required to invest at least 99.5% of its total assets in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities and/or cash (“government securities”).

Accordingly, effective on or about September 29, 2020, the Fund will invest at least 99.5% of its total assets in government securities and the Fund’s name will change to Vanguard Cash Reserves Federal Money Market Fund. The Fund will continue to invest more than 25% of its assets in the financial services industry (i.e., issuers principally engaged in providing financial services to consumers and industry), which includes securities issued by government-sponsored enterprises, such as the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), and the Federal Home Loan Banks. Currently, the Fund has no limit on its ability to invest in government securities, and will continue to increase such investments prior to changing its designation to a government money market fund.


In addition, in connection with the change in the Fund’s name, the Board also approved the implementation of a policy for the Fund to invest, under normal circumstances, at least 80% of its assets in securities issued by the U.S. government and its agencies and instrumentalities. This policy will become effective concurrent with the other changes to change the Fund’s designation to a government money market fund.


Lower Investment Minimum
The Board has also approved lowering the investment minimum for AdmiralTM Shares of the Fund to $3,000, effective immediately. Investors may convert their Investor Shares to Admiral Shares at any time by accessing their account at vanguard.com or by contacting Vanguard.

It is anticipated that all of the outstanding Investor Shares of the Fund will be automatically converted to Admiral Shares beginning in the fall of 2020 and continuing through 2021. Once all investors have been converted from Investor Shares to Admiral Shares, the Fund’s Investor Share class will be eliminated.

The Fund’s registration statement will be updated on or about September 29, 2020, to reflect these changes.
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Re: Prime Money Market Changing to Cash Reserves Federal Money Market

Post by Walkure »

adestefan wrote: Thu Aug 27, 2020 9:36 am [Merged here - mod oldcomputerguy]

Prime is moving from a 33% tilt to a full cash, federal, and federal collateralized fund. Change will occur in September.

Other changes include lower Admiral limit to $3000. You can move now or it will automatically happen over the next 6 months. However, there’s no check writing on Admiral class funds.

https://investornews.vanguard/changes-t ... nd-lineup/
The press release says "If you don’t initiate a conversion, you’ll be automatically converted sometime between late 2020 through 2021."
Are they phasing out the investor class altogether? What if you have less than $3000 in your account?

ETA: I'm going to enjoy this experiment. I've had Prime in my (non-brokerage) mutual fund account for ages with a balance of like $8. It's pure cash drag that I could toss into a fund at any time but it's so tiny I figure it's worth keeping it open just to see if Vanguard does anything. Years ago I called customer service about another issue, and while looking through my account the rep mentioned that they go through about once a year and flag funds under $1000 (i.e. well below the $3000 minimum) for closure. Since it's not a brokerage account there's no sweep account to dump it into, so I assume they just let it go. Now I'm on the edge of my seat waiting to see if they convert my $8 to Admiral. Your move, Vanguard. :twisted:
Last edited by Walkure on Thu Aug 27, 2020 12:07 pm, edited 1 time in total.
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by xenial »

I'm surprised Vanguard didn't just merge Prime Money Market into Federal Money Market. The new "Cash Reserves Federal Money Market" is almost identical to the existing Federal Money Market. I guess it's 1 bp cheaper and doesn't allow checkwriting, but I don't see any other differences.
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Re: Prime Money Market Changing to Cash Reserves Federal Money Market

Post by Gort »

FrugalInvestor wrote: Thu Aug 27, 2020 11:10 am
adestefan wrote: Thu Aug 27, 2020 9:36 am [Merged here - mod oldcomputerguy]

Prime is moving from a 33% tilt to a full cash, federal, and federal collateralized fund. Change will occur in September.

Other changes include lower Admiral limit to $3000. You can move now or it will automatically happen over the next 6 months. However, there’s no check writing on Admiral class funds.

https://investornews.vanguard/changes-t ... nd-lineup/
Well that's disappointing because I always like lower expenses but one of the reasons I keep a reserve at Vanguard is to be able to write a larger check on short notice in the event my checking account balance is low. I use my checking as a pass-thru primarily for bill-pay so don't keep much money there.
I have checkwriting on the Vanguard Federal Money Market Fund (settlement fund) with Vanguard Short-Term Bond Index Fund being my alternative redemption fund. For those who want checkwriting I wonder if you will be able to designate the newly named Cash Reserves Federal Money Market Fund (admiral shares) as an alternative redemption fund?
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by Rainmaker41 »

xenial wrote: Thu Aug 27, 2020 11:49 am I'm surprised Vanguard didn't just merge Prime Money Market into Federal Money Market. The new "Cash Reserves Federal Money Market" is almost identical to the existing Federal Money Market. I guess it's 1 bp cheaper and doesn't allow checkwriting, but I don't see any other differences.
This was my first thought too.
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Money Market with check writing...help

Post by discgolfplayer »

[Merged into the existing discussion -- mod oldcomputerguy]

The Prime Money Market is changing. Vanguard states check writing will not be available when it's converted. I only want a money market fund for it's check writing and Prime has served me well over many years. Could someone direct me to a money market fund with that privilege? Also, when I change MM funds, will that create a tax event? The 3 funds I hold, I have had for 20 years. All are taxable. Thanks.
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by Cheez-It Guy »

Thread has no credibility until Kevin M weighs in.
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Re: Prime Money Market Changing to Cash Reserves Federal Money Market

Post by abuss368 »

greg24 wrote: Thu Aug 27, 2020 9:46 am What does this mean for the little guy? I used to like having checkwriting on my PMM account, but we have rarely used it, so we'll drop it for admiral shares.

Instead of just going to the new Cash Reserves fund, should I consider one of their other MM funds? The Treasury MM Fund VUSXX is reopening.
Note: Our checkwriting service isn’t available for the fund’s Admiral share class. Checkwriting is available for Vanguard Federal Money Market Fund and other Vanguard money market funds.
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by boater07 »

This is really confusing.
I just want emergency check writing. What happens to my check supply when I open a new account.
Their automatic transfer will not permit check writing.
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by retiringwhen »

boater07 wrote: Thu Aug 27, 2020 12:20 pm This is really confusing.
I just want emergency check writing. What happens to my check supply when I open a new account.
Their automatic transfer will not permit check writing.
If you want check writing, put the money the Settlement Account / Federal Money Market / VMFXX.

It is now almost indistinguishable from the revised Prime fund. You'll pay 0.01% more ER for the privileges of writing checks.

I already did that a couple of months ago since the yields have merged and Federal appears to be slightly ahead for moderately high income tax-rate investors.

What will be interesting is the resulting yield difference between the Treasury Money Market and this fund. My guess is they'll run almost equivalent. I can't see after taxes that the repurchase agreements will boost yields much.
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by MadHungarian »

Every things free wrote: Thu Aug 27, 2020 9:56 am I just received the notice and made the switch today.

Kim
So is everyone else, apparently. I can't get into the Vanguard website right now...
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Re: Money Market with check writing...help

Post by Chrono Triggered »

discgolfplayer wrote: Thu Aug 27, 2020 11:56 am [Merged into the existing discussion -- mod oldcomputerguy]

The Prime Money Market is changing. Vanguard states check writing will not be available when it's converted. I only want a money market fund for it's check writing and Prime has served me well over many years. Could someone direct me to a money market fund with that privilege? Also, when I change MM funds, will that create a tax event? The 3 funds I hold, I have had for 20 years. All are taxable. Thanks.
Welcome to the forum. I use Fidelity and it will automatically sell money market funds to satisfy withdrawals. They should be no taxable event if you sell a money market fund.
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by Electron »

I just processed the conversion a few minutes ago. The checkwriting option carried over at least for the time being.

That could change in late September or maybe the information is incorrect.

Code: Select all

Options that will be carried over to your new fund

Dividends		Reinvest
Capital gains		Reinvest
Checkwriting		Established
Bank transfer eligible	Established
Wire eligible		Established
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by John Z »

I know this info isn't even a day old but I'm confused and maybe all the info above has my answer but I'll try asking here. Help please.

Like others above I use Prime check writing to pay expenses over $250.
I only have a mutual fund account (IRAs, Roths) and don't want any part of a brokerage account.
What fund can I transfer my Prime to that allows check writing and doesn't require a brokerage account that is not Admiral or is this a way for VG to get us to go to brokerage?
VMFXX? (VG Federal Money Market)
VUSXX? (VG Treasury Money Market) not established yet
Any other(s)?
And I assume I would need new checks and wonder how long that will take.

Thank you for your help.
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by Kevin M »

John Z wrote: Thu Aug 27, 2020 1:54 pm Like others above I use Prime check writing to pay expenses over $250.
Why? Yield is only 0.04% (0.10% on Admiral shares). You could use Ally checking with overdraft from Ally savings at 0.80% APY.
John Z wrote: Thu Aug 27, 2020 1:54 pm I only have a mutual fund account (IRAs, Roths) and don't want any part of a brokerage account.
What fund can I transfer my Prime to that allows check writing and doesn't require a brokerage account that is not Admiral or is this a way for VG to get us to go to brokerage?
VMFXX? (VG Federal Money Market)
VUSXX? (VG Treasury Money Market) not established yet
Any other(s)?
It appears that you can use VMFXX in an old-platform mutual fund account. I initiated an exchange in such an account, and it let me select VMFXX as a new fund in "where's the money going". But I didn't complete the exchange, because I don't want to do this.

VUSXX has a minimum initial investment of $50K. But yield is only 0.08%, so I don't know why you'd want to use it at current rates. However, if you do, once the fund is open, your balance can drop to a small amount and the fund will remain open.

Another option would be a municipal money market fund, such as VMSXX, currently with an SEC yield of 0.11% (for me a taxable-equivalent yield, TEY, of 0.16%). Again, at current low yields, I don't see the point.

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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by John Z »

Thanks Kevin, the kind of info I was looking for.
I only park the money in the MM account to cover the checks I'm writing. I don't use the MM for investing in any way.
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Re: Vanguard Makes Changes to its Money Market Funds - What's Best Now?

Post by LadyGeek »

I merged Billavoider's thread into the on-going discussion. The combined thread is in the Investing - Theory, News & General forum (news).
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by boater07 »

If I transfer my PMM to a new account with check writing , will V simply send new checks?
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Kevin M »

Image

SEC = SEC yield. For the bank accounts,the interest rate is in this column.
TEY = Taxable-equivalent Yield.
ATY = After-tax yield.
Cmpd = Compound yield (this is the money-market equivalent of APY for a bank account).
NP = No penalty. Ally NP CD is Ally's 11-month no-penalty CD from which no-penalty early withdrawals can be taken after 7 days.

TEY and ATY values are for my marginal federal and state tax rates of 27% and 8% respectively.

At current low yields there is no difference between interest rate or SEC yield and APY or compound yield to two decimal places. For example, the Ally savings interest rate is 0.79683%, which of course rounds to 0.80%, which is the APY Ally shows.

Today I was able to convert Prime MM to admiral shares only in accounts with $3,000 or more in Prime (which of course is the new minimum initial investment for Prime Admiral shares). I assume Vanguard will either convert funds with less than that to Admiral shares later in the year, or perhaps tell us we must increase to fund amount to $3,000, but I don't know what they would do in the latter case if we don't increase it. Perhaps start charging a maintenance fee of some sort. For a brokerage account, I could see Vanguard selling the shares and putting the proceeds into the settlement fund, VBMFX, but in an old-platform mutual fund account, there is no settlement fund, and the minimum initial investment for VBMFX on old platform also is $3,000.

I use money market funds in some IRAs, where it is not as easy or convenient to move cash to a bank account.

The timing of this move by Vanguard is kind of funny for me. I have been moving cash from Prime to Federal MM in Vanguard IRAs recently, since there is not much difference in yields (Fed MM actually higher than Prime Investor shares), and I figured why risk the imposition of liquidity gates or fees unless there's a significant yield advantage. As others have mentioned, it will be interesting to see if Vanguard removes the potential for imposing liquidity gates and fees from Prime MM once the transition to mostly government securities is complete. Also as others have questioned, why not just merge Prime with Federal, since it appears that they will be essentially the same once the transition is complete (and they even will both have "Federal" in their names).

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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by palanzo »

Looks like Vanguard is concerned with the risks of commercial paper.
“Vanguard investors prioritize capital preservation for their money market investments, and we believe that the rewards of even the most conservatively managed prime funds are no longer worth the risk,” said Greg Davis, Vanguard chief investment officer, in a statement.
https://www.cnbc.com/2020/08/27/vanguar ... ments.html
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Electron »

Vanguard states that the new fund will invest almost exclusively in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash.

How do you invest in cash? I wonder if they mean cash equivalents that pay some interest.

The new fund may allow shareholders to exclude some income on their state tax returns. It will depend on the percentage in U.S. Government securities.
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by abuss368 »

This is interesting. A month or two ago I was reading about prime money market funds in The Wall Street Journal. While the WSJ does not make me rethink or tinker with my portfolio, this did just that. I actually started an earlier thread about the safety of prime money markets, the Federal Reserve impact (now twice in 12 years) and the possibility of using the Treasury or Federal money markets.

I selected the Federal money market. This is also the default for Vanguard PSA.
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by abuss368 »

Now that I think about it: Vanguard PAS - will they continue using the Federal money market as the default or this new Federal cash money market fund?
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by adestefan »

palanzo wrote: Thu Aug 27, 2020 3:24 pm Looks like Vanguard is concerned with the risks of commercial paper.
“Vanguard investors prioritize capital preservation for their money market investments, and we believe that the rewards of even the most conservatively managed prime funds are no longer worth the risk,” said Greg Davis, Vanguard chief investment officer, in a statement.
https://www.cnbc.com/2020/08/27/vanguar ... ments.html
Agree. I think this says more about the stability of commercial credit markets than anything else. This also isn’t something you do in two weeks so they’ve had to be thinking, analyzing, and planning this transition for some time.
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Chuck »

Electron wrote: Thu Aug 27, 2020 3:42 pm How do you invest in cash?
Big mattress in Malvern, PA.
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Kevin M »

Electron wrote: Thu Aug 27, 2020 3:42 pm The new fund may allow shareholders to exclude some income on their state tax returns. It will depend on the percentage in U.S. Government securities.
I believe that residents of states other than CA, CT and NY already can take a state income tax deduction for the percentage of income from USGO, which was 28.23% for 2019. The three states mentioned, "require that 50% of the fund’s assets at each quarter-end within the tax year consist of U.S. government obligations", and Prime MM has not met this requirement in previous years (and almost certainly will not for 2020).

Federal MM met this requirement for 2019, with 79.51% of assets in USGO as of 12/31/2019 (Vanguard doesn't tell us the percentages at the ends of the other quarters, but does tell us that the fund met the requirement); 77.79% of income was from USGO. I would assume that that Prime MM will meet this requirement for 2021, but not for 2020.

Of course the state tax exemption is of barely-noticeable benefit at current low yields--at least at my marginal state tax rate of 8%.

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Prime MM being dissolved

Post by frankie7447 »

[merged into existing thread - moderator prudent]

Vanguard announced today in an email that it was transferring existing Prime MM funds into a new Cash Reserves Federal MM fund effectively dissolving Prime over the coming months. Does anyone have any insights into what the motivation for this is? Is Vanguard having trouble maintaining the $1.00 per share price on this fund? Are negative rates in other parts of the world pressuring the investment community and our Federal Reserve? Or is it just risk factors in the financial sectors of the market? I know the Fed has the major banks performing stress tests but does Vanguard think there's more to this so they're ushering $$$ to this Cash Reserves Fund which has a heavy Federal Government weighting? Interested in other viewpoints.
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