Parking Free cash in MMF on Schwab. Best MMF?

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NewInvestor306
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Parking Free cash in MMF on Schwab. Best MMF?

Post by NewInvestor306 »

Hi All,

So I've done some research and hopefully, I am right, but it sounds like the best option for some free cash that I would like some-what liquid, but could be a long term investment and not too risky would be a Money Market Fund.

I am on Schwab and wanted to see where others have placed some cash, or seek some advice as to what to look for or avoid. I am assuming I can put the cash into this MMF, about $15-30k and just set it and forget it for a while.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by mindboggling »

I have most of my investments at Schwab and I have to say that Schwab is not a good place to hold cash. I would recommend using a high-yield savings account at an online bank. I use Synchrony, but if you want something more full-service many here use Ally or a credit union.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by 123 »

Yields on all MMFs are low right now so it may not make much of a difference.

Based on my experience with Schwab all their MMFs are "purchased" MMFs and are not "sweepable". What this means is that you have to do a mutual fund "buy" and a separate "sell" to get in and out of the MMF (of course you can reinvest dividends/interest). So if you decide to make a securities purchase you have to do a separate trade to move the cash from the MMF to your cash settlement account.

Most other brokerages let you use a MMF as your default "sweep" account, dividends/interest/deposits into the account automatically get moved into a MMF and if you make a purchase shares in the MMF are automatically redeemed. That's how most other brokerages work, but not Schwab (they used to but a few years back they changed). Their current method serves to increase the amount on deposit with Schwab Bank so that makes some money for them.

The screwy way Schwab does their settlement accounts this way would be enough to make me look elsewhere for a broker. But we hold a number of accounts with Schwab and they are all 100% buy-and-hold invested with no trading so this Schwab policy hasn't chased us away yet.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by NewInvestor306 »

123 wrote: Tue Sep 14, 2021 12:04 pm Yields on all MMFs are low right now so it may not make much of a difference.

Based on my experience with Schwab all their MMFs are "purchased" MMFs and are not "sweepable". What this means is that you have to do a mutual fund "buy" and a separate "sell" to get in and out of the MMF (of course you can reinvest dividends/interest). So if you decide to make a securities purchase you have to do a separate trade to move the cash from the MMF to your cash settlement account.

Most other brokerages let you use a MMF as your default "sweep" account, dividends/interest/deposits into the account automatically get moved into a MMF and if you make a purchase shares in the MMF are automatically redeemed. That's how most other brokerages work, but not Schwab (they used to but a few years back they changed). Their current method serves to increase the amount on deposit with Schwab Bank so that makes some money for them.

The screwy way Schwab does their settlement accounts this way would be enough to make me look elsewhere for a broker. But we hold a number of accounts with Schwab and they are all 100% buy-and-hold invested with no trading so this Schwab policy hasn't chased us away yet.
Ah are there any other options to park some set it and forget it cash? This is money from an EF that is likely way too high for me but I know as time goes on ill need to increase it as I start a family. Figured there would be a relatively decent place to put it and let it grow vs getting .5% interest even if it does add in some risk.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by anon_investor »

NewInvestor306 wrote: Tue Sep 14, 2021 12:13 pm Ah are there any other options to park some set it and forget it cash? This is money from an EF that is likely way too high for me but I know as time goes on ill need to increase it as I start a family. Figured there would be a relatively decent place to put it and let it grow vs getting .5% interest even if it does add in some risk.
I Bonds, but you can't touch them for 12 months.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by 123 »

The best options for holding cash for some return are typically High Yield Savings Accounts (HYSA) at places like Ally https://www.ally.com/ , Marcus https://www.marcus.com/us/en , or Synchrony https://www.synchrony.com/ . Some of them have "No Penalty CDs" for something like 11 months. You lock in a rate for 11 months but you can withdraw funds any time after the first 7 to 10 days without any penalty. We hold a number of "No Penalty CDs" with Ally.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by NewInvestor306 »

123 wrote: Tue Sep 14, 2021 12:20 pm The best options for holding cash for some return are typically High Yield Savings Accounts (HYSA) at places like Ally https://www.ally.com/ , Marcus https://www.marcus.com/us/en , or Synchrony https://www.synchrony.com/ . Some of them have "No Penalty CDs" for something like 11 months. You lock in a rate for 11 months but you can withdraw funds any time after the first 7 to 10 days without any penalty. We hold a number of "No Penalty CDs" with Ally.
All my accounts are with Ally, and the fund i want to take some out of to invest, but not put in stocks...unless maybe it's some safe ETF?
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by NewInvestor306 »

NewInvestor306 wrote: Tue Sep 14, 2021 12:24 pm
123 wrote: Tue Sep 14, 2021 12:20 pm The best options for holding cash for some return are typically High Yield Savings Accounts (HYSA) at places like Ally https://www.ally.com/ , Marcus https://www.marcus.com/us/en , or Synchrony https://www.synchrony.com/ . Some of them have "No Penalty CDs" for something like 11 months. You lock in a rate for 11 months but you can withdraw funds any time after the first 7 to 10 days without any penalty. We hold a number of "No Penalty CDs" with Ally.
ll my accounts are with Ally, and the fund i want to take some out of to invest, but not put in stocks...unless maybe it's some safe ETF? I will look at their CDs to see if the are worth it as not sure what they are paying.
Last edited by NewInvestor306 on Tue Sep 14, 2021 12:25 pm, edited 1 time in total.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by goodenyou »

After a lot of looking, I am seriously considering a MYGA.

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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by NewInvestor306 »

anon_investor wrote: Tue Sep 14, 2021 12:14 pm
NewInvestor306 wrote: Tue Sep 14, 2021 12:13 pm Ah are there any other options to park some set it and forget it cash? This is money from an EF that is likely way too high for me but I know as time goes on ill need to increase it as I start a family. Figured there would be a relatively decent place to put it and let it grow vs getting .5% interest even if it does add in some risk.
I Bonds, but you can't touch them for 12 months.
Yeah I've read about these. I should probably look into them. You can only buy $10k worth of one correct?
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by anon_investor »

NewInvestor306 wrote: Tue Sep 14, 2021 12:25 pm
anon_investor wrote: Tue Sep 14, 2021 12:14 pm
NewInvestor306 wrote: Tue Sep 14, 2021 12:13 pm Ah are there any other options to park some set it and forget it cash? This is money from an EF that is likely way too high for me but I know as time goes on ill need to increase it as I start a family. Figured there would be a relatively decent place to put it and let it grow vs getting .5% interest even if it does add in some risk.
I Bonds, but you can't touch them for 12 months.
Yeah I've read about these. I should probably look into them. You can only buy $10k worth of one correct?
Yes, $10k/yr per SSN, so $20k/yr total for a married couple. Currently they offer a guaranteed 6 months at 3.54% APY. The rate resets every 6 months based on an inflation index (I believe it is CPI). They must be held for 12 months minimum, and there is a 3 month interest rate penalty if reedeemed before 5 years. But they are only issued by/redeemed with the US Treasury (via treasurydirect.com), so they are risk free. With inflation still high, the next rate reset is expected to still be a good APY.

https://www.bogleheads.org/wiki/I_savings_bonds
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by jeffyscott »

anon_investor wrote: Tue Sep 14, 2021 12:32 pm
NewInvestor306 wrote: Tue Sep 14, 2021 12:25 pm
anon_investor wrote: Tue Sep 14, 2021 12:14 pm
NewInvestor306 wrote: Tue Sep 14, 2021 12:13 pm Ah are there any other options to park some set it and forget it cash? This is money from an EF that is likely way too high for me but I know as time goes on ill need to increase it as I start a family. Figured there would be a relatively decent place to put it and let it grow vs getting .5% interest even if it does add in some risk.
I Bonds, but you can't touch them for 12 months.
Yeah I've read about these. I should probably look into them. You can only buy $10k worth of one correct?
Yes, $10k/yr per SSN, so $20k/yr total for a married couple. Currently they offer a guaranteed 6 months at 3.54% APY. The rate resets every 6 months based on an inflation index (I believe it is CPI). They must be held for 12 months minimum, and there is a 3 month interest rate penalty if reedeemed before 5 years. But they are only issued by/redeemed with the US Treasury (via treasurydirect.com), so they are risk free. With inflation still high, the next rate reset is expected to still be a good APY.

https://www.bogleheads.org/wiki/I_savings_bonds
The reset will apparently be 6.56% plus or minus the remaining month's inflation/deflation.
https://tipswatch.com/2021/09/14/august ... -and-tips/

Even with the 3 month penalty, I bonds bought from now until next April should earn over 3% in the first year. So for $10K per person this year and another $10K next year is going to be far better than any savings account.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by anon_investor »

jeffyscott wrote: Tue Sep 14, 2021 4:41 pm
anon_investor wrote: Tue Sep 14, 2021 12:32 pm
NewInvestor306 wrote: Tue Sep 14, 2021 12:25 pm
anon_investor wrote: Tue Sep 14, 2021 12:14 pm
NewInvestor306 wrote: Tue Sep 14, 2021 12:13 pm Ah are there any other options to park some set it and forget it cash? This is money from an EF that is likely way too high for me but I know as time goes on ill need to increase it as I start a family. Figured there would be a relatively decent place to put it and let it grow vs getting .5% interest even if it does add in some risk.
I Bonds, but you can't touch them for 12 months.
Yeah I've read about these. I should probably look into them. You can only buy $10k worth of one correct?
Yes, $10k/yr per SSN, so $20k/yr total for a married couple. Currently they offer a guaranteed 6 months at 3.54% APY. The rate resets every 6 months based on an inflation index (I believe it is CPI). They must be held for 12 months minimum, and there is a 3 month interest rate penalty if reedeemed before 5 years. But they are only issued by/redeemed with the US Treasury (via treasurydirect.com), so they are risk free. With inflation still high, the next rate reset is expected to still be a good APY.

https://www.bogleheads.org/wiki/I_savings_bonds
The reset will apparently be 6.56% plus or minus the remaining month's inflation/deflation.
https://tipswatch.com/2021/09/14/august ... -and-tips/

Even with the 3 month penalty, I bonds bought from now until next April should earn over 3% in the first year. So for $10K per person this year and another $10K next year is going to be far better than any savings account.
I agree I Bonds are the best deal right now. We maxed out for 2020 and 2021 and will max out again in early 2022.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by jeffyscott »

123 wrote: Tue Sep 14, 2021 12:04 pm Yields on all MMFs are low right now so it may not make much of a difference.

Based on my experience with Schwab all their MMFs are "purchased" MMFs and are not "sweepable". What this means is that you have to do a mutual fund "buy" and a separate "sell" to get in and out of the MMF (of course you can reinvest dividends/interest). So if you decide to make a securities purchase you have to do a separate trade to move the cash from the MMF to your cash settlement account.

Most other brokerages let you use a MMF as your default "sweep" account, dividends/interest/deposits into the account automatically get moved into a MMF and if you make a purchase shares in the MMF are automatically redeemed. That's how most other brokerages work, but not Schwab (they used to but a few years back they changed). Their current method serves to increase the amount on deposit with Schwab Bank so that makes some money for them.

The screwy way Schwab does their settlement accounts this way would be enough to make me look elsewhere for a broker. But we hold a number of accounts with Schwab and they are all 100% buy-and-hold invested with no trading so this Schwab policy hasn't chased us away yet.
Currently it makes no difference, you'll get negligible interest (0.01%) from any money market fund, just as you will from Schwab's bank settlement account.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by TropikThunder »

123 wrote: Tue Sep 14, 2021 12:04 pm Based on my experience with Schwab all their MMFs are "purchased" MMFs and are not "sweepable". What this means is that you have to do a mutual fund "buy" and a separate "sell" to get in and out of the MMF (of course you can reinvest dividends/interest). So if you decide to make a securities purchase you have to do a separate trade to move the cash from the MMF to your cash settlement account.
That was my experience as well. I use Schwab for my everyday checking account and had planned to use SWVXX to park what I didn't need in my checking account but having to actually do a sell transaction and wait for it to settle before transferring to checking was a deal-breaker.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by TropikThunder »

NewInvestor306 wrote: Tue Sep 14, 2021 11:43 am I am on Schwab and wanted to see where others have placed some cash, or seek some advice as to what to look for or avoid. I am assuming I can put the cash into this MMF, about $15-30k and just set it and forget it for a while.
Consider a Schwab High Yield Savings Account. Current yield on that is 0.05% compared to the current yield on the Schwab MMF SWVXX, which is only 0.03%. And as 123 said, the MMF is kind of awkward to work with.

https://www.schwab.com/savings
https://www.schwabassetmanagement.com/p ... und-yields
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by lws »

Try Ally. That's a good parking spot.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by Doc »

NewInvestor306 wrote: Tue Sep 14, 2021 11:43 am I am assuming I can put the cash into this MMF, about $15-30k and just set it and forget it for a while.
For that amount of money I would consider T-Bills. Completely liquid and no ER. Very small cost if you need to "withdraw" before maturity.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by jeffyscott »

Doc wrote: Wed Sep 15, 2021 9:04 am
NewInvestor306 wrote: Tue Sep 14, 2021 11:43 am I am assuming I can put the cash into this MMF, about $15-30k and just set it and forget it for a while.
For that amount of money I would consider T-Bills. Completely liquid and no ER. Very small cost if you need to "withdraw" before maturity.
I'd think it's not worth the bother to get about 0.05% yield. For $30K, that's an extra $12 per year vs. leaving it in settlement account at 0.01%.

A savings account will pay about 10X that and some may even give you a $100 bonus for opening an account, Citi was offering that.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by Doc »

jeffyscott wrote: Wed Sep 15, 2021 10:52 am
Doc wrote: Wed Sep 15, 2021 9:04 am
NewInvestor306 wrote: Tue Sep 14, 2021 11:43 am I am assuming I can put the cash into this MMF, about $15-30k and just set it and forget it for a while.
For that amount of money I would consider T-Bills. Completely liquid and no ER. Very small cost if you need to "withdraw" before maturity.
I'd think it's not worth the bother to get about 0.05% yield. For $30K, that's an extra $12 per year vs. leaving it in settlement account at 0.01%.

A savings account will pay about 10X that and some may even give you a $100 bonus for opening an account, Citi was offering that.
You are correct that the money involved is trivial. But the timing issue is not. If I have a T-bill I can sell it and reinvest or withdraw the money in a matter of minutes. The savings account is another matter entirely.

The settlement fund vs. T-bill is just a bookkeeping issue. Twelve payments a year vs. one or two depending on your T-bill maturity.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by tomsense76 »

anon_investor wrote: Tue Sep 14, 2021 12:32 pm
NewInvestor306 wrote: Tue Sep 14, 2021 12:25 pm
anon_investor wrote: Tue Sep 14, 2021 12:14 pm
NewInvestor306 wrote: Tue Sep 14, 2021 12:13 pm Ah are there any other options to park some set it and forget it cash? This is money from an EF that is likely way too high for me but I know as time goes on ill need to increase it as I start a family. Figured there would be a relatively decent place to put it and let it grow vs getting .5% interest even if it does add in some risk.
I Bonds, but you can't touch them for 12 months.
Yeah I've read about these. I should probably look into them. You can only buy $10k worth of one correct?
Yes, $10k/yr per SSN, so $20k/yr total for a married couple. Currently they offer a guaranteed 6 months at 3.54% APY. The rate resets every 6 months based on an inflation index (I believe it is CPI). They must be held for 12 months minimum, and there is a 3 month interest rate penalty if reedeemed before 5 years. But they are only issued by/redeemed with the US Treasury (via treasurydirect.com), so they are risk free. With inflation still high, the next rate reset is expected to still be a good APY.

https://www.bogleheads.org/wiki/I_savings_bonds
Also $5k/yr per tax return by overpaying taxes. Trusts and businesses can also buy them up to $10k/year each. So if you have a trust or run your own business (like a contracting arrangement), then you could get more this way.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by jeffyscott »

Doc wrote: Wed Sep 15, 2021 1:16 pm
jeffyscott wrote: Wed Sep 15, 2021 10:52 am
Doc wrote: Wed Sep 15, 2021 9:04 am
NewInvestor306 wrote: Tue Sep 14, 2021 11:43 am I am assuming I can put the cash into this MMF, about $15-30k and just set it and forget it for a while.
For that amount of money I would consider T-Bills. Completely liquid and no ER. Very small cost if you need to "withdraw" before maturity.
I'd think it's not worth the bother to get about 0.05% yield. For $30K, that's an extra $12 per year vs. leaving it in settlement account at 0.01%.

A savings account will pay about 10X that and some may even give you a $100 bonus for opening an account, Citi was offering that.
You are correct that the money involved is trivial. But the timing issue is not. If I have a T-bill I can sell it and reinvest or withdraw the money in a matter of minutes. The savings account is another matter entirely.

The settlement fund vs. T-bill is just a bookkeeping issue. Twelve payments a year vs. one or two depending on your T-bill maturity.
Right, so what I meant was that if it were me and I wanted to be able to immediately invest or something, I would just leave it in settlement rather than trading in and out of t-bills for a measly extra buck or two per month.

OTOH, if I don't care about having immediate investment ability, I would move cash to a savings account. Which is what I have actually done. And I am now migrating that gradually to I-bonds, spreading out the move so that all the money is not locked up at once.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by tomsense76 »

OP basically there is no risk free return because the Fed said so. That's not really going to change until the Fed changes their mind.

The only way you are going to earn more yield than a bank (outside of maybe I savings bonds) is by taking some risk. However as this is an EF, one shouldn't be taking risk with that as it could disappear putting you in a bind when you need it most.

There are of course certain tricks one can do by moving cash into I Bonds or into one's pre-tax account or chasing bank/brokerage sign up bonuses. Though these come with potential illiquidity issues and other risks, which will need to be assessed.

If this EF has grown too large, this should really be the focus. Namely why has it grown so large? How much do you actually need in your EF? How quickly do you need to access your EF? Also why do you hold an EF (what emergencies do you envision)? These will help answer what to do with this money.

Something else to reflect on is whether an EF is still needed. Perhaps an EF no longer makes sense if your portfolio has grown large enough. In particular I find this blogpost instructive.
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by TropikThunder »

Doc wrote: Wed Sep 15, 2021 1:16 pm You are correct that the money involved is trivial. But the timing issue is not. If I have a T-bill I can sell it and reinvest or withdraw the money in a matter of minutes. The savings account is another matter entirely.
How is the savings account “another matter”? You really can’t withdraw money from a savings account easier then selling T-bills?
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by Doc »

TropikThunder wrote: Wed Sep 15, 2021 5:56 pm
Doc wrote: Wed Sep 15, 2021 1:16 pm You are correct that the money involved is trivial. But the timing issue is not. If I have a T-bill I can sell it and reinvest or withdraw the money in a matter of minutes. The savings account is another matter entirely.
How is the savings account “another matter”? You really can’t withdraw money from a savings account easier then selling T-bills?
How long does it take to take money from a savings account and buy an an ETF?

With T-Bills it is fast as I can type. (And much faster than it took me to make this reply. :D )
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by BrokerageZelda »

Doc wrote: Thu Sep 16, 2021 8:36 am
TropikThunder wrote: Wed Sep 15, 2021 5:56 pm
Doc wrote: Wed Sep 15, 2021 1:16 pm You are correct that the money involved is trivial. But the timing issue is not. If I have a T-bill I can sell it and reinvest or withdraw the money in a matter of minutes. The savings account is another matter entirely.
How is the savings account “another matter”? You really can’t withdraw money from a savings account easier then selling T-bills?
How long does it take to take money from a savings account and buy an an ETF?

With T-Bills it is fast as I can type. (And much faster than it took me to make this reply. :D )
Newbie question because I've never used T-Bills before - how are T-Bills faster than a bank? Is this with T-Bills held with a brokerage and/or TreasuryDirect? You make it sound like you can get cash out of a T-Bill faster than you can get cash out of a savings account, but I must be misunderstanding something. Does Treasury deposit the money like a wire transfer?
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Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by Doc »

BrokerageZelda wrote: Thu Sep 16, 2021 9:19 am
Doc wrote: Thu Sep 16, 2021 8:36 am
TropikThunder wrote: Wed Sep 15, 2021 5:56 pm
Doc wrote: Wed Sep 15, 2021 1:16 pm You are correct that the money involved is trivial. But the timing issue is not. If I have a T-bill I can sell it and reinvest or withdraw the money in a matter of minutes. The savings account is another matter entirely.
How is the savings account “another matter”? You really can’t withdraw money from a savings account easier then selling T-bills?
How long does it take to take money from a savings account and buy an an ETF?

With T-Bills it is fast as I can type. (And much faster than it took me to make this reply. :D )
Newbie question because I've never used T-Bills before - how are T-Bills faster than a bank? Is this with T-Bills held with a brokerage and/or TreasuryDirect? You make it sound like you can get cash out of a T-Bill faster than you can get cash out of a savings account, but I must be misunderstanding something. Does Treasury deposit the money like a wire transfer?
I hold Treasury bills/note/bonds through our brokerage accounts. The money for a maturing security is deposited the same day. If you want the money sooner you just sell the Treasury on the market. The trade closes immediately and there is no wait to buy something else. If your account is a margin account you can transfer that money to your bank in a matter of minutes by wire transfer. If it's not a margin account your transfer is effective the next business day. (Most of our taxable brokerage assets are in margin accounts but I never use that margin ability as leverage.)

I gave up on Treasury direct many years ago becaue I didn't find it of any benefit over a "normal" brokerage account now that you no longer have to buy T's in multiples of 100.
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nanotube
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Joined: Mon Oct 05, 2020 10:13 am

Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by nanotube »

I parked cash in the HMBradley 3% APY savings account. Good choice if you can meet their direct deposit requirements (I direct a tiny fraction of my paycheck there). Although time is ticking if you want to have 3% right now - HMBradley starts at 1%, and updates every quarter. This means that on Oct. 1st they will check and see if a new account had any direct deposit in September to decide if 3% rate applies in Q4.
Atilla
Posts: 1510
Joined: Tue Feb 09, 2010 7:44 pm

Re: Parking Free cash in MMF on Schwab. Best MMF?

Post by Atilla »

Kabbage is paying 1.10% right now- for up to $100,000. Plus you get a debit card that works at ATMs for no charge at every Walgreens, CVS, Target, Kroger, Safeway, Circle K and Speedway in the US.

It's a little dinking around to get it set up and the money in, but it's what I'm doing right now with my cash.
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