Where do you put cash now? Vanguard's Prime Money Market is too low!

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Noobvestor
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by Noobvestor »

colodane wrote: Sat Sep 05, 2020 5:58 pm Seems like only yesterday when all the Vanguard MM funds were yielding close to 5%. Those were the good old days for retirees like me. I was lazy and had quite a lot of $$ there.

But decided a few months ago to move most of my MM $$ to something with a measurable yield. I'm now mostly in VSGDX - the Vanguard Short Term Federal Bond fund. 30 day SEC yield of 0.92% currently. $50K minimum.

Yes, it is riskier than an online bank savings account that pays about the same return. But, again, I'm lazy. So didn't want the hassle of sending $$ outside of Vanguard.

I'm comfortable with the increased risk, but it certainly isn't for everyone. But it is convenient. Only time will tell, however, how low the yield will be in the future relative to the banks.

Not recommending it for all, but it is my current solution.
Hmmm - how is that fund able to offer so much more than Short-Term Treasuries?
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by bck63 »

andysnp wrote: Fri Sep 04, 2020 1:43 pm Where do you put your cash right now?

Vanguard's Prime Money Market is giving only .04 yield right now.

Thanks!
Half of my emergency fund is in the Vanguard LifeStrategy Income Fund (VASIX), which is 20% stocks and yields 1.73%. The other half is in the Vanguard Federal Money Market Fund. I'm willing to risk a 5-7% loss of principal with the two combined funds in order to get some capital growth and earn a yield of about 0.86%.

This has worked out great so far and I'd still be ahead of the game with a 50-70% stock market decline.

Day-to-day cash needs are in a Fidelity Cash Management Account (FDIC insured).
Last edited by bck63 on Sun Sep 06, 2020 2:39 pm, edited 2 times in total.
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by jeffyscott »

Noobvestor wrote: Sun Sep 06, 2020 3:10 am
colodane wrote: Sat Sep 05, 2020 5:58 pm Seems like only yesterday when all the Vanguard MM funds were yielding close to 5%. Those were the good old days for retirees like me. I was lazy and had quite a lot of $$ there.

But decided a few months ago to move most of my MM $$ to something with a measurable yield. I'm now mostly in VSGDX - the Vanguard Short Term Federal Bond fund. 30 day SEC yield of 0.92% currently. $50K minimum.

Yes, it is riskier than an online bank savings account that pays about the same return. But, again, I'm lazy. So didn't want the hassle of sending $$ outside of Vanguard.

I'm comfortable with the increased risk, but it certainly isn't for everyone. But it is convenient. Only time will tell, however, how low the yield will be in the future relative to the banks.

Not recommending it for all, but it is my current solution.
Hmmm - how is that fund able to offer so much more than Short-Term Treasuries?
It's about 56% mortgage backed securities. However, I do not trust the reported SEC yield as the YTM is 0.8% and that does not include the 0.1% ER. I'm not sure how a fund with a net YTM of 0.7% ends up with the SEC calculation showing a yield of 0.9% but I suspect it is related to the MBS based on the SEC providing two different ways of doing the calculation for MBS:

For discount and premium on mortgage or other receivables-backed obligations that are
expected to be subject to monthly payments of principal and interest (“paydowns”):
(a) Account for gain or loss attributable to actual monthly paydowns as an increase or
decrease to interest income during the period; and
(b) The Fund may elect:
(i) To amortize the discount and premium on the remaining securities, based on the cost of
the securities, to the weighted average maturity date, if the information is available, or to
the remaining term of the securities, if the weighted average maturity date is not
available; or
(ii) Not to amortize the discount or premium on the remaining securities.

https://www.sec.gov/files/formn-1a.pdf (see page 57 of document, which is page 67 of the pdf)


This is from 1993, but based on those instructions, it doesn't seem that things have changed with regard to MBS:
Therefore, the SEC has given them a choice: to amortize premiums and discounts or not to amortize them. Thus, two funds hypothetically could have identical portfolios and costs but different yields because of different policies for adjusting investment income.
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by Kevin K »

bck63 wrote: Sun Sep 06, 2020 5:56 am
andysnp wrote: Fri Sep 04, 2020 1:43 pm Where do you put your cash right now?

Vanguard's Prime Money Market is giving only .04 yield right now.

Thanks!
Half of my emergency fund is the the Vanguard LifeStrategy Income Fund (VASIX), which is 20% stocks and yields 1.73%. The other half is in the Vanguard Federal Money Market Fund. I'm will to risk a 5-7% loss of principal with the two combined funds in order to get some capital growth and earn a yield of about 0.86%.

This has worked out great so far and I'd still be ahead of the game with a 50-70% stock market decline.

Day-to-day cash needs are in a Fidelity Cash Management Account (FDIC insured).
This strikes me as a pretty wise play under the circumstances. That LifeStrategy Income Fund doesn't seem to be on most people's radar screen at all - VTINX with 30% stocks and some TIPS in the bond allocation gets more attention (though both are probably way too conservative for most on these forums, from what I can tell). Still the 80% in bonds in VASIX is all TBM and TIMB, with intermediate duration and lots of corporates. Seems like it'd be safer to just add a tiny slice of one or both of the TSM ETF's and use T-bills or ultra-short Treasuries (e.g. SHV) for the rest since there's no reward and plenty of risk in longer durations and/or the hedged international bonds Vanguard insists on using in the LifeStrategy funds for some reason.
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by Nowizard »

Unless you have a very large stash of cash, you won't find much of anything of significance without taking more risk. Take a look at all the related threads on MM, CD's, bonds, dividend paying stocks, etc. Truly, this is one of those times when those looking for higher returns are going to either scramble or just accept the rather bitter pill. It does occur that there could be some benefit to checking comments from countries that have experienced this circumstance for years to determine additional alternatives.

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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by Fomalhaut »

Since my credit union savings account was paying the same as Vanguard Prime, I just rolled it over into the savings account. IMO, it would be inconvient to scour around looking for a better paying account as I don't presently require an increased return at any cost. For me, easy access is presently far more important.
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by JackoC »

Nowizard wrote: Sun Sep 06, 2020 10:51 am Unless you have a very large stash of cash, you won't find much of anything of significance without taking more risk. Take a look at all the related threads on MM, CD's, bonds, dividend paying stocks, etc. Truly, this is one of those times when those looking for higher returns are going to either scramble or just accept the rather bitter pill. It does occur that there could be some benefit to checking comments from countries that have experienced this circumstance for years to determine additional alternatives.
For scale it's the other way around. If you have such a large stash of cash that would require an unmanageable number of $250k (FDIC/NCUA insured) bank accounts, you're going to get *less* on very low risk cash because you will have to put it in MM fund or T-bills.

If you're below that level, best paying bank accounts now are a no brainer compared to VMFXX, etc. they pay relatively much more with practically the same risk (if anything slightly less).

If a person only has $1k or few in cash...hard to see why they're participating in such discussions: it barely matters what they earn on that small an amount.

As far as 'you can only get more return with more risk' that's only true if it's some entirely unrealistic idea of getting 3% or 5% without risk. Maybe there's some people talking past one another on that. I don't think there's any way to get a 'good' return on 'riskless' cash, but if somebody says 'VMMXX is too low' (the title of this thread) there is a simple alternative that pays *relatively* a lot more for practically the same risk or a little less: best yielding bank accounts. I can't see the reason now to have non-negligible amounts in MM funds, except money just about to be deployed to buy something else, or IOW no reason to have significant average balance. Sometimes bank accounts and MM funds have similar returns, now they don't. In the wake of 2009 bank accounts were also strictly superior for a number of years. Which is also BTW also the pattern in negative rate countries like EUR zone: short term govt bonds are negative yield, but the best bank accounts are slightly positive yield.
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by Colorado Guy »

colodane wrote: Sat Sep 05, 2020 5:58 pm Seems like only yesterday when all the Vanguard MM funds were yielding close to 5%. Those were the good old days for retirees like me. I was lazy and had quite a lot of $$ there.

But decided a few months ago to move most of my MM $$ to something with a measurable yield. I'm now mostly in VSGDX - the Vanguard Short Term Federal Bond fund. 30 day SEC yield of 0.92% currently. $50K minimum.

Yes, it is riskier than an online bank savings account that pays about the same return. But, again, I'm lazy. So didn't want the hassle of sending $$ outside of Vanguard.

I'm comfortable with the increased risk, but it certainly isn't for everyone. But it is convenient. Only time will tell, however, how low the yield will be in the future relative to the banks.

Not recommending it for all, but it is my current solution.
Colodane,
Thx for the reference, highly appreciated!
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by atdharris »

I'm in a NPCD at Ally for 1%. I make a whopping $20/month on the $25k I deposited. The rest of my extra cash is in a HYSA, but it really does feel pointless. I could just consolidate to my main bank and earn nothing on my cash. I'd miss out on maybe $200/year.
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by zaplunken »

SethJane42 wrote: Fri Sep 04, 2020 3:16 pm VUBFX has a minimal risk with a Vanguard risk level of 1, isn't bound by frequent trader rules, and the yield is a bit better than the money market.
Vanguard's Ultra Short Term Bond Fund does not have the 30 day lockout? You can trade in and out as much as you want? I doubt that, can anyone confirm that? I used to hold that fund and wouldn't be trading it, I'm just curious cuz I thought all their funds followed that 30 day rule?
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by jeffyscott »

zaplunken wrote: Sun Sep 06, 2020 8:02 pm
SethJane42 wrote: Fri Sep 04, 2020 3:16 pm VUBFX has a minimal risk with a Vanguard risk level of 1, isn't bound by frequent trader rules, and the yield is a bit better than the money market.
Vanguard's Ultra Short Term Bond Fund does not have the 30 day lockout? You can trade in and out as much as you want? I doubt that, can anyone confirm that? I used to hold that fund and wouldn't be trading it, I'm just curious cuz I thought all their funds followed that 30 day rule?
Money Market and Short term bond funds are the first exception listed in the policy:

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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by zaplunken »

jeffyscott wrote: Sun Sep 06, 2020 9:38 pm
zaplunken wrote: Sun Sep 06, 2020 8:02 pm
SethJane42 wrote: Fri Sep 04, 2020 3:16 pm VUBFX has a minimal risk with a Vanguard risk level of 1, isn't bound by frequent trader rules, and the yield is a bit better than the money market.
Vanguard's Ultra Short Term Bond Fund does not have the 30 day lockout? You can trade in and out as much as you want? I doubt that, can anyone confirm that? I used to hold that fund and wouldn't be trading it, I'm just curious cuz I thought all their funds followed that 30 day rule?
Money Market and Short term bond funds are the first exception listed in the policy:

Image
https://personal.vanguard.com/us/faces/ ... ontent.jsp
Thanks Jeffy, I didn't think they changed that since they really don't want market timing and all the trading just drives up the costs for the buy and hold folks.
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by MikeG62 »

andysnp wrote: Fri Sep 04, 2020 1:43 pm Where do you put your cash right now?

Vanguard's Prime Money Market is giving only .04 yield right now.

Thanks!
Assume you are referring to very liquid S/T cash (and not money that could be invested in CD's). In that case, I use no-penalty CD's and online savings accounts. MMF yields are awful.

This is not likely to be a huge amount of money based upon the above definition. So in some respects it won't make much of a difference. Still, why not pick up the highest yield you can (without investing a ton of effort).
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by AerialWombat »

andysnp wrote: Fri Sep 04, 2020 1:43 pm Where do you put your cash right now?

Vanguard's Prime Money Market is giving only .04 yield right now.

Thanks!
Cash is for piece of mind. Sleeping well at night. Backstop against financial calamity. Cash is not for yield.

I use a CD ladder and savings at Discover Bank. Currently savings is at 0.7%. Good enough.

My rental properties, not my cash, are for chasing yield.
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by jeffyscott »

zaplunken wrote: Mon Sep 07, 2020 7:52 am
jeffyscott wrote: Sun Sep 06, 2020 9:38 pm
zaplunken wrote: Sun Sep 06, 2020 8:02 pm
SethJane42 wrote: Fri Sep 04, 2020 3:16 pm VUBFX has a minimal risk with a Vanguard risk level of 1, isn't bound by frequent trader rules, and the yield is a bit better than the money market.
Vanguard's Ultra Short Term Bond Fund does not have the 30 day lockout? You can trade in and out as much as you want? I doubt that, can anyone confirm that? I used to hold that fund and wouldn't be trading it, I'm just curious cuz I thought all their funds followed that 30 day rule?
Money Market and Short term bond funds are the first exception listed in the policy:

Image
https://personal.vanguard.com/us/faces/ ... ontent.jsp
Thanks Jeffy, I didn't think they changed that since they really don't want market timing and all the trading just drives up the costs for the buy and hold folks.
I don't know that this is a change, do you? High turnover seems to be normal for bond funds including even index funds, anyway. Vanguard short-term bond index turnover has been around 50% per year and Ultrashort has been 60-80% per year, so managing some investor trading doesn't seem like it would be significant. The trading is not necessarily market timing, people may use short term bond funds as a cash substitute.
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Some things are worth more than money

Post by Taylor Larimore »

Bogleheads:

For many years we've kept our accounts at a large nearby bank within walking distance. I know everyone in the bank and they greet me with a wave and smile whenever I walk in. I've joined the employees in their private lunch room (the ultimate invite). I use their credit card. Whenever I've needed something I pick up the phone and it is done. When my wife died (after 62 years of marriage) two bankers visited me for condolence and signature help.

I keep a sizeable checking account and I've been invited to use their "Wealth Management" services upstairs. I wouldn't think of it. What's my interest rate? I don't know. I do know I'm getting the best rate the bank offers (I've checked). They also give veterans special perks which I appreciate.

Some things are worth more than money.

Best wishes.
Taylor
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Re: Some things are worth more than money

Post by abuss368 »

Taylor Larimore wrote: Mon Sep 07, 2020 9:34 am Bogleheads:

For many years we've kept our accounts at a large nearby bank within walking distance. I know everyone in the bank and they greet me with a wave and smile whenever I walk in. I've joined the employees in their private lunch room (the ultimate invite). I use their credit card. Whenever I've needed something I pick up the phone and it is done. When my wife died (after 62 years of marriage) two bankers visited me for condolence and signature help.

I keep a sizeable checking account and I've been invited to use their "Wealth Management" services upstairs. I wouldn't think of it. What's my interest rate? I don't know. I do know I'm getting the best rate the bank offers (I've checked). They also give veterans special perks which I appreciate.

Some things are worth more than money.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: I challenge the growing trend in our society to give numbers a credence that they simply don’t deserve, all the while assigning far less importance to the things that can’t be expressed with numbers – qualities such as wisdom, integrity, ethics, and commitment.
We have learned this as well. We moved back to a large bank, Wells Fargo, and the experience has been very good. We have no issues when calling or having to stop into the branch. Many years ago we were with an internet bank and preferred a physical location.

Some things are more important than a little higher interest rate.
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Re: Some things are worth more than money

Post by somber »

abuss368 wrote: Mon Sep 07, 2020 2:45 pm We have learned this as well. We moved back to a large bank, Wells Fargo, and the experience has been very good. We have no issues when calling or having to stop into the branch. Many years ago we were with an internet bank and preferred a physical location.

Some things are more important than a little higher interest rate.
You may already be aware, but I'd like to caution you to watch Wells Fargo like a hawk. There's a reason why Clark Howard refers to them as "A criminal enterprise masquerading as a bank". In recent years they have been caught doing things with their customer's accounts without permission. This led to congressional hearings and huge fines. Their behavior since the fines has continued to be poor. I know you should watch your accounts carefully regardless of institution, but accounts at Wells Fargo should receive special attention.
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Re: Some things are worth more than money

Post by abuss368 »

somber wrote: Thu Sep 10, 2020 9:21 am
abuss368 wrote: Mon Sep 07, 2020 2:45 pm We have learned this as well. We moved back to a large bank, Wells Fargo, and the experience has been very good. We have no issues when calling or having to stop into the branch. Many years ago we were with an internet bank and preferred a physical location.

Some things are more important than a little higher interest rate.
You may already be aware, but I'd like to caution you to watch Wells Fargo like a hawk. There's a reason why Clark Howard refers to them as "A criminal enterprise masquerading as a bank". In recent years they have been caught doing things with their customer's accounts without permission. This led to congressional hearings and huge fines. Their behavior since the fines has continued to be poor. I know you should watch your accounts carefully regardless of institution, but accounts at Wells Fargo should receive special attention.
Appreciate that and I am well aware. Reading about it in Wall Street Journal the last few years. Also watched an episode of "Dirty Money" on Netflix. Hopefully the culture will improve and build from there.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by bog007 »

They're all crooks
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by bck63 »

In addition to my post above, I've put some cash into about 20 high-dividend, low-beta stocks.Weighted average dividend yield is 3.1%. Also own sector ETFs with high dividends and low beta.
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by AerialWombat »

bck63 wrote: Sun Sep 13, 2020 4:49 pm In addition to my post above, I've put some cash into about 20 high-dividend, low-beta stocks.Weighted average dividend yield is 3.1%. Also own sector ETFs with high dividends and low beta.
Then it’s no longer cash, it’s in equities, with all the inherent risks of equities.
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by bck63 »

AerialWombat wrote: Sun Sep 13, 2020 4:59 pm
bck63 wrote: Sun Sep 13, 2020 4:49 pm In addition to my post above, I've put some cash into about 20 high-dividend, low-beta stocks.Weighted average dividend yield is 3.1%. Also own sector ETFs with high dividends and low beta.
Then it’s no longer cash, it’s in equities, with all the inherent risks of equities.
Correct. As indicated in my post, I've put some cash into about 20 high-dividend, low-beta stocks. The question was, "where do you put cash now?" I put it in equities.
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by bighatnohorse »

Kenkat wrote: Fri Sep 04, 2020 2:16 pm It’s 0.8, not 0.08. So it ends up being about $8 per thousand per year.
I can make that in a month just by switching brands of beer. :beer
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by EnjoyIt »

bighatnohorse wrote: Sun Sep 13, 2020 5:40 pm
Kenkat wrote: Fri Sep 04, 2020 2:16 pm It’s 0.8, not 0.08. So it ends up being about $8 per thousand per year.
I can make that in a month just by switching brands of beer. :beer
Or you can buy twice as much beer.
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by jdb »

Vanguard Intermediate Tax Exempt Admiral Fund. In our tax bracket equivalent to about a 1.3% taxable equivalent yield. And immediate liquidity. Good luck.
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by Bama12 »

10k saving local Credit Union for things happen (AC,Roof,etc). Don't even know rate, but it's low.
3 Months of income local Credit Union. 2% first 2,500 dollars, don't even know the rate on the rest but it's low.
All other cash 50% in Vanguard Federal M.M-VMFXX and 50% in Vanguard Total Stock Market-VTI.
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by jakechance »

Is there any difference or reason to continue to hold onto VMMXX when the settlement fund is now VMFXX?
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by colodane »

jakechance wrote: Thu Oct 01, 2020 9:10 am Is there any difference or reason to continue to hold onto VMMXX when the settlement fund is now VMFXX?
Not in my opinion. I converted my VMMXX in my IRA account to VMFXX a couple weeks ago. Was holding off doing the same in my taxable account because, in addition to VMMXX, I also have some VUSXX there. Was thinking of maybe just moving all the MM into the VUSXX. But only now about 4 basis point advantage to doing so, and that isn't significant enough for me. Also, if the MM returns stay this way for an appreciable amount of time, I may not even want to keep the $50K VUSXX minimum in MM, but rather move more to the short term Federal bond fund. So plan to convert the VMMXX to VMFXX next week and then wait and see what happens in the next few months before making any more decisions.
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by anon_investor »

jeffyscott wrote: Sun Sep 06, 2020 7:41 am
Noobvestor wrote: Sun Sep 06, 2020 3:10 am
colodane wrote: Sat Sep 05, 2020 5:58 pm Seems like only yesterday when all the Vanguard MM funds were yielding close to 5%. Those were the good old days for retirees like me. I was lazy and had quite a lot of $$ there.

But decided a few months ago to move most of my MM $$ to something with a measurable yield. I'm now mostly in VSGDX - the Vanguard Short Term Federal Bond fund. 30 day SEC yield of 0.92% currently. $50K minimum.

Yes, it is riskier than an online bank savings account that pays about the same return. But, again, I'm lazy. So didn't want the hassle of sending $$ outside of Vanguard.

I'm comfortable with the increased risk, but it certainly isn't for everyone. But it is convenient. Only time will tell, however, how low the yield will be in the future relative to the banks.

Not recommending it for all, but it is my current solution.
Hmmm - how is that fund able to offer so much more than Short-Term Treasuries?
It's about 56% mortgage backed securities. However, I do not trust the reported SEC yield as the YTM is 0.8% and that does not include the 0.1% ER. I'm not sure how a fund with a net YTM of 0.7% ends up with the SEC calculation showing a yield of 0.9% but I suspect it is related to the MBS based on the SEC providing two different ways of doing the calculation for MBS:

For discount and premium on mortgage or other receivables-backed obligations that are
expected to be subject to monthly payments of principal and interest (“paydowns”):
(a) Account for gain or loss attributable to actual monthly paydowns as an increase or
decrease to interest income during the period; and
(b) The Fund may elect:
(i) To amortize the discount and premium on the remaining securities, based on the cost of
the securities, to the weighted average maturity date, if the information is available, or to
the remaining term of the securities, if the weighted average maturity date is not
available; or
(ii) Not to amortize the discount or premium on the remaining securities.

https://www.sec.gov/files/formn-1a.pdf (see page 57 of document, which is page 67 of the pdf)


This is from 1993, but based on those instructions, it doesn't seem that things have changed with regard to MBS:
Therefore, the SEC has given them a choice: to amortize premiums and discounts or not to amortize them. Thus, two funds hypothetically could have identical portfolios and costs but different yields because of different policies for adjusting investment income.
https://www.chicagotribune.com/news/ct- ... story.html
I still get confused with the distribution yield and the sec yield. While the Vanguard Federal Short Term Bond Fund has a higher 30 day SEC yield, the Vanguard Short Term Bond Index Fund has a higher distribution yield. Which one results in better "interest" if comparing to a high yield savings account?
MikeG62
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Re: Where do you put cash now? Vanguard's Prime Money Market is too low!

Post by MikeG62 »

anon_investor wrote: Thu Oct 01, 2020 6:57 pm
jeffyscott wrote: Sun Sep 06, 2020 7:41 am
Noobvestor wrote: Sun Sep 06, 2020 3:10 am
colodane wrote: Sat Sep 05, 2020 5:58 pm Seems like only yesterday when all the Vanguard MM funds were yielding close to 5%. Those were the good old days for retirees like me. I was lazy and had quite a lot of $$ there.

But decided a few months ago to move most of my MM $$ to something with a measurable yield. I'm now mostly in VSGDX - the Vanguard Short Term Federal Bond fund. 30 day SEC yield of 0.92% currently. $50K minimum.

Yes, it is riskier than an online bank savings account that pays about the same return. But, again, I'm lazy. So didn't want the hassle of sending $$ outside of Vanguard.

I'm comfortable with the increased risk, but it certainly isn't for everyone. But it is convenient. Only time will tell, however, how low the yield will be in the future relative to the banks.

Not recommending it for all, but it is my current solution.
Hmmm - how is that fund able to offer so much more than Short-Term Treasuries?
It's about 56% mortgage backed securities. However, I do not trust the reported SEC yield as the YTM is 0.8% and that does not include the 0.1% ER. I'm not sure how a fund with a net YTM of 0.7% ends up with the SEC calculation showing a yield of 0.9% but I suspect it is related to the MBS based on the SEC providing two different ways of doing the calculation for MBS:

For discount and premium on mortgage or other receivables-backed obligations that are
expected to be subject to monthly payments of principal and interest (“paydowns”):
(a) Account for gain or loss attributable to actual monthly paydowns as an increase or
decrease to interest income during the period; and
(b) The Fund may elect:
(i) To amortize the discount and premium on the remaining securities, based on the cost of
the securities, to the weighted average maturity date, if the information is available, or to
the remaining term of the securities, if the weighted average maturity date is not
available; or
(ii) Not to amortize the discount or premium on the remaining securities.

https://www.sec.gov/files/formn-1a.pdf (see page 57 of document, which is page 67 of the pdf)


This is from 1993, but based on those instructions, it doesn't seem that things have changed with regard to MBS:
Therefore, the SEC has given them a choice: to amortize premiums and discounts or not to amortize them. Thus, two funds hypothetically could have identical portfolios and costs but different yields because of different policies for adjusting investment income.
https://www.chicagotribune.com/news/ct- ... story.html
I still get confused with the distribution yield and the sec yield. While the Vanguard Federal Short Term Bond Fund has a higher 30 day SEC yield, the Vanguard Short Term Bond Index Fund has a higher distribution yield. Which one results in better "interest" if comparing to a high yield savings account?
SEC Yield. Distribution yields includes a return of principal component.
Real Knowledge Comes Only From Experience
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