"Vanguard Money Market Funds: What You Need To Know"

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Taylor Larimore
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"Vanguard Money Market Funds: What You Need To Know"

Post by Taylor Larimore »

Bogleheads:

Kent Thune at Yahoo Finance, has written a very informative article about Vanguard's confusing Money Market Funds. These are excerpts:
"Vanguard money market funds don't get a lot of love from the investment community, nor do they receive much attention in financial media."

"But just about every Vanguard investor's assets are held in one of these cash accounts, even if only for a brief period. Thus, it's wise to know how Vanguard's money market funds work, and which one is best for your needs."

"The typical objective of money market funds is to provide current income, while maintaining liquidity and a stable price of $1 per share."

"We'll break down what investors need to know about Vanguard's money market funds, both taxable and non-taxable, and which type might be best for your needs."
https://www.yahoo.com/lifestyle/vanguar ... 25415.html

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "They (money market funds) tend to deliver very modest returns, such such reserves should be considered as saving for short-term and emergency needs, not as investment for long-term capital accumulation."
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by watchnerd »

Taylor Larimore wrote: Wed Jun 09, 2021 8:04 pm Bogleheads:

Kent Thune at Yahoo Finance, has written a very informative article about Vanguard's confusing Money Market Funds. These are excerpts:
"Vanguard money market funds don't get a lot of love from the investment community, nor do they receive much attention in financial media."

"But just about every Vanguard investor's assets are held in one of these cash accounts, even if only for a brief period. Thus, it's wise to know how Vanguard's money market funds work, and which one is best for your needs."

"The typical objective of money market funds is to provide current income, while maintaining liquidity and a stable price of $1 per share."

"We'll break down what investors need to know about Vanguard's money market funds, both taxable and non-taxable, and which type might be best for your needs."
https://www.yahoo.com/lifestyle/vanguar ... 25415.html

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "They (money market funds) tend to deliver very modest returns, such such reserves should be considered as saving for short-term and emergency needs, not as investment for long-term capital accumulation."
I gave up on any money market-like instrument in Vanguard Taxable as they're all negative real yield.

Short TIPS (VTAPX) has done better than all of the money market funds mentioned in that article and the duration is short enough that the volatility is low:

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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by bertilak »

I have a money market settlement fund at Vanguard. They chose which MM fund to use and I never questioned it. That was easy! No complicated decisions for me. I figure they all have about the same (net zero) yield and they all maintain a $1 price. Money passes through and nothing much lingers there so how big a difference can it make?

Let me know if I'm missing something significant.
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by watchnerd »

bertilak wrote: Thu Jun 10, 2021 12:49 pm Money passes through and nothing much lingers there so how big a difference can it make?
If it's just transient for settlement, the choice doesn't matter much.
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by anon_investor »

I thought I read some where that Vanguard was looking into creating an FDIC insured option, maybe similar to what Fidelity, which sweeps it into multiple banks to offer FDIC insurance greater than the normal $250k limit.
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by mikejuss »

Who actually keeps a meaningful amount of money in a money-market fund?
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by doctorfaust »

mikejuss wrote: Thu Jun 10, 2021 1:46 pm Who actually keeps a meaningful amount of money in a money-market fund?
Potentially doesn't meet your cutoff for "meaningful amount", but my emergency fund (9 mos. expenses) is in a Vanguard MMF, rather than my brick-and-mortar bank savings account.
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by leeks »

mikejuss wrote: Thu Jun 10, 2021 1:46 pm Who actually keeps a meaningful amount of money in a money-market fund?
We have 6 figures in money market funds for a potential house purchase in a very high-cost market. Because we may use it in 0-3 years, we don't want to risk it losing any money. Bond funds are not looking better for a short period. My husband, in particular, would not emotionally tolerate any loss in what he considers "savings" (as opposed to retirement accounts which are "investments" and so he isn't bothered if they fluctuate). We have thought about moving to a 0.5% savings account but even that isn't much and the intro rate might later be reduced and we prefer not to bother opening a new account and dealing with another bank login and such. If a savings account offered closer to 1%, it would feel worth moving.
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by mikejuss »

doctorfaust wrote: Thu Jun 10, 2021 2:20 pm
mikejuss wrote: Thu Jun 10, 2021 1:46 pm Who actually keeps a meaningful amount of money in a money-market fund?
Potentially doesn't meet your cutoff for "meaningful amount", but my emergency fund (9 mos. expenses) is in a Vanguard MMF, rather than my brick-and-mortar bank savings account.
Are you getting more or less than the 0.5% currently being offered by Marcus?
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by mikejuss »

leeks wrote: Thu Jun 10, 2021 2:21 pm
mikejuss wrote: Thu Jun 10, 2021 1:46 pm Who actually keeps a meaningful amount of money in a money-market fund?
We have 6 figures in money market funds for a potential house purchase in a very high-cost market. Because we may use it in 0-3 years, we don't want to risk it losing any money. Bond funds are not looking better for a short period. My husband, in particular, would not emotionally tolerate any loss in what he considers "savings" (as opposed to retirement accounts which are "investments" and so he isn't bothered if they fluctuate). We have thought about moving to a 0.5% savings account but even that isn't much and the intro rate might later be reduced and we prefer not to bother opening a new account and dealing with another bank login and such. If a savings account offered closer to 1%, it would feel worth moving.
I guess this falls into the category of shrug for me. I have a Marcus account currently paying out 0.5%. Can't money-market accounts actually go down?
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by doctorfaust »

mikejuss wrote: Thu Jun 10, 2021 2:22 pm
doctorfaust wrote: Thu Jun 10, 2021 2:20 pm
mikejuss wrote: Thu Jun 10, 2021 1:46 pm Who actually keeps a meaningful amount of money in a money-market fund?
Potentially doesn't meet your cutoff for "meaningful amount", but my emergency fund (9 mos. expenses) is in a Vanguard MMF, rather than my brick-and-mortar bank savings account.
Are you getting more or less than the 0.5% currently being offered by Marcus?
Probably not, but the small amount that 0.5% of that amount would be doesn't justify the hassle of opening and maintaining an account at another institution, for me.
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by anon_investor »

doctorfaust wrote: Thu Jun 10, 2021 2:43 pm
mikejuss wrote: Thu Jun 10, 2021 2:22 pm
doctorfaust wrote: Thu Jun 10, 2021 2:20 pm
mikejuss wrote: Thu Jun 10, 2021 1:46 pm Who actually keeps a meaningful amount of money in a money-market fund?
Potentially doesn't meet your cutoff for "meaningful amount", but my emergency fund (9 mos. expenses) is in a Vanguard MMF, rather than my brick-and-mortar bank savings account.
Are you getting more or less than the 0.5% currently being offered by Marcus?
Probably not, but the small amount that 0.5% of that amount would be doesn't justify the hassle of opening and maintaining an account at another institution, for me.
I think a lot of people already have a HYSA, so it is not such a big hassle.
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by mikejuss »

doctorfaust wrote: Thu Jun 10, 2021 2:43 pm
mikejuss wrote: Thu Jun 10, 2021 2:22 pm
doctorfaust wrote: Thu Jun 10, 2021 2:20 pm
mikejuss wrote: Thu Jun 10, 2021 1:46 pm Who actually keeps a meaningful amount of money in a money-market fund?
Potentially doesn't meet your cutoff for "meaningful amount", but my emergency fund (9 mos. expenses) is in a Vanguard MMF, rather than my brick-and-mortar bank savings account.
Are you getting more or less than the 0.5% currently being offered by Marcus?
Probably not, but the small amount that 0.5% of that amount would be doesn't justify the hassle of opening and maintaining an account at another institution, for me.
I hear ya--there's something to be said for having fewer accounts overall.
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by leeks »

mikejuss wrote: Thu Jun 10, 2021 2:24 pm
leeks wrote: Thu Jun 10, 2021 2:21 pm
mikejuss wrote: Thu Jun 10, 2021 1:46 pm Who actually keeps a meaningful amount of money in a money-market fund?
We have 6 figures in money market funds for a potential house purchase in a very high-cost market. Because we may use it in 0-3 years, we don't want to risk it losing any money. Bond funds are not looking better for a short period. My husband, in particular, would not emotionally tolerate any loss in what he considers "savings" (as opposed to retirement accounts which are "investments" and so he isn't bothered if they fluctuate). We have thought about moving to a 0.5% savings account but even that isn't much and the intro rate might later be reduced and we prefer not to bother opening a new account and dealing with another bank login and such. If a savings account offered closer to 1%, it would feel worth moving.
I guess this falls into the category of shrug for me. I have a Marcus account currently paying out 0.5%. Can't money-market accounts actually go down?
Technically yes, no FDIC guarantee, but it is extremely unlikely that a Vanguard money market fund will lose money. The extra bit of interest (before our 45% marginal tax rate) hasn't felt worth it to deal with a new bank who might just use the 0.5% as a teaser rate anyway. We don't want to move large sums of money around every few months chasing miniscule benefits. And we could spend the money soon enough that the difference matters even less.

We value simplicity, our time, and using known/trusted institutions more than a few hundred bucks here or there.
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by Robot Monster »

mikejuss wrote: Thu Jun 10, 2021 1:46 pm Who actually keeps a meaningful amount of money in a money-market fund?
I do. Very much so. I'm not proud of it. I've been trying to improve my portfolio, and I have. I used to be basically all cash. In recent times I have held my nose and pulled the trigger on both stocks and TIPS. Both of these assets come with, shall we say, "unpleasantries". Stocks are unpleasantly volatile, and TIPS are unpleasantly negative yielding; locking in a negative yield for 30 years ain't fun.

Now I have a core invested portfolio that is approximately 60% TIPS, 30% stocks, and 10% intermediate-term Treasuries. It's 92x expenses.

Unfortunately, sadly, miserably, I still have a boatload of "trash" on my hands that I have not yet suffered myself into pulling the trigger on. It's currently withering away in the Vanguard Treasury Money Market Dumpster.
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by mikejuss »

Robot Monster wrote: Fri Jun 11, 2021 10:06 am
mikejuss wrote: Thu Jun 10, 2021 1:46 pm Who actually keeps a meaningful amount of money in a money-market fund?
I do. Very much so. I'm not proud of it. I've been trying to improve my portfolio, and I have. I used to be basically all cash. In recent times I have held my nose and pulled the trigger on both stocks and TIPS. Both of these assets come with, shall we say, "unpleasantries". Stocks are unpleasantly volatile, and TIPS are unpleasantly negative yielding; locking in a negative yield for 30 years ain't fun.

Now I have a core invested portfolio that is approximately 60% TIPS, 30% stocks, and 10% intermediate-term Treasuries. It's 92x expenses.

Unfortunately, sadly, miserably, I still have a boatload of "trash" on my hands that I have not yet suffered myself into pulling the trigger on. It's currently withering away in the Vanguard Treasury Money Market Dumpster.
Huh--I guess you're a really conservative investor. There's nothing wrong with that. But maybe you can take part of your 92x expenses, and put it into a more aggressive fund, for a charity or an heir of your choice?
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by Robot Monster »

mikejuss wrote: Fri Jun 11, 2021 10:15 am
Robot Monster wrote: Fri Jun 11, 2021 10:06 am
mikejuss wrote: Thu Jun 10, 2021 1:46 pm Who actually keeps a meaningful amount of money in a money-market fund?
I do. Very much so. I'm not proud of it. I've been trying to improve my portfolio, and I have. I used to be basically all cash. In recent times I have held my nose and pulled the trigger on both stocks and TIPS. Both of these assets come with, shall we say, "unpleasantries". Stocks are unpleasantly volatile, and TIPS are unpleasantly negative yielding; locking in a negative yield for 30 years ain't fun.

Now I have a core invested portfolio that is approximately 60% TIPS, 30% stocks, and 10% intermediate-term Treasuries. It's 92x expenses.

Unfortunately, sadly, miserably, I still have a boatload of "trash" on my hands that I have not yet suffered myself into pulling the trigger on. It's currently withering away in the Vanguard Treasury Money Market Dumpster.
Huh--I guess you're a really conservative investor. There's nothing wrong with that. But maybe you can take part of your 92x expenses, and put it into a more aggressive fund, for a charity or an heir of your choice?
I actually very much appreciate that feedback, and will put thought into your suggestion. Thank you.

Edit: You inspired me to add more to my Inflation-Protected Securities Admiral. Added 3x expenses. And this discussion has made me realize dribbling more into that fund over time would be something I can do. Thanks again.
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by nisiprius »

The most interesting thing to me in the article--not commented on, certainly not explained--is that VMMXX, formerly the Vanguard Prime Money Market Fund, is now named the Vanguard Cash Reserves Federal Money Market Fund. Vanguard announced this back in August, 2020--Changes to our taxable money market fund lineup. VMMXX itself is now closed to new investors; you have to buy the Admiral Shares class, VMRXX, with a $3,000 minimum; and checkwriting is no longer available.

Just think: I must have gotten one of those emails mentioning the change and enclosing the new prospectus, and I didn't pay any attention. Of course it hardly matters to me, because as I write this, I literally have zero dollars in any money market mutual fund, not even the settlement account.
Vanguard wrote:We’ve updated the fund’s prospectus to reflect its new investment strategy, which focuses almost exclusively on cash investments, U.S. government securities, and/or repurchase agreements collateralized solely by U.S. government securities or cash.
I think this makes it more conservative and tamer than it was when it was the "Prime Money Market Account."

When it was still "Prime," I remember being surprised--you can still download the 8/31/2020 annual report and see this--by the amount of international investments in it. 4.5% Yankee Certificates of Deposit, 5.4% foreign banks, 0.6% foreign government, 0.6% foreign industrial, so that's 11.1%. It might have been even more than that before.
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by asset_chaos »

nisiprius wrote: Fri Jun 11, 2021 6:12 pm I think this makes it more conservative and tamer than it was when it was the "Prime Money Market Account."
Indeed, in fact so much more conservative I have a hard time differentiating what-used-to-be-prime from the federal money market fund. Not that the two funds have identical holdings, but that they have so much the same type of holdings that it's hard to see why Vanguard has two nearly identical funds at all, instead of just merging them together. The only reason I can see is to keep a substantially identical money market fund that is not the brokerage account settlement fund, as the federal fund is.
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by Robot Monster »

watchnerd wrote: Wed Jun 09, 2021 11:27 pm Short TIPS (VTAPX) has done better than all of the money market funds mentioned in that article
I have to admit I recoiled in horror when I saw the -2.85% 30 day SEC yield on VTIP, but then I read the following from the Wall Street Journal article, "Markets Are Leaving Little Room for the Fed to Be Wrong on Inflation".

"Even short-term inflation expectations are priced for the Fed to hit its target after a brief bout of inflation in the next 12 months. If that proves mistaken, bond yields and inflation break-evens—the gap between ordinary and inflation-linked Treasurys—should be higher, and big technology stocks should be lower." link
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Re: "Vanguard Money Market Funds: What You Need To Know"

Post by Makefile »

asset_chaos wrote: Fri Jun 11, 2021 7:20 pm
nisiprius wrote: Fri Jun 11, 2021 6:12 pm I think this makes it more conservative and tamer than it was when it was the "Prime Money Market Account."
Indeed, in fact so much more conservative I have a hard time differentiating what-used-to-be-prime from the federal money market fund. Not that the two funds have identical holdings, but that they have so much the same type of holdings that it's hard to see why Vanguard has two nearly identical funds at all, instead of just merging them together. The only reason I can see is to keep a substantially identical money market fund that is not the brokerage account settlement fund, as the federal fund is.
Maybe they are expecting an additional round of money market fund reform to further clamp down on these funds. For example, if the rules for funds that both maintain the $1 price and are available to institutional investors are made even more strict, they might keep Cash Reserves Federal around as a fund for individual investors only with more flexibility. I suspect the prospect of more reform is why they already pulled out of the "prime" market entirely.
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