Does Schwab SWVXX or Vanguard VMFXX have any risk of breaking the buck in current environment since I have over $250k emergency funds sitting in those. I see that VMFXX portfolio is invested mostly in more secure:
Repurchase Agreements 57.20%
U.S. Govt. Obligations 39.80%
While SWVXX money is invested in all kinds of shady commercial papers, agencies, repos and CDs etc. and they dont give a percentage of portfolio what is invested where. What is the chance it may break the buck and so better to move the SWVXX money to SNSXX or VMFXX
Last edited by ebeb on Mon Mar 13, 2023 4:47 pm, edited 1 time in total.
ebeb wrote: ↑Mon Mar 13, 2023 4:02 pm... What is the chance it may break the buck and so better to move the SWVXX money to SNSXX or VMFXX
The "chance" of it is not realy quantifiable. It is a risk. If you believe the consequences are not something you can handle, or isn't compensating you adequately to accept the consequences, don't take the risk.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Interesting that first time today SWVXX lost -3.3B in outflows and there was no negative daily outflows in last 6 months. Similarly SNSXX had +2B in inflows today and their normal average inflows are about 5-10M daily in the past 6 months. Seems lot of people are moving to safety of treasuries unless I triggered a market panic by moving my 200k from SWVXX to SNSXX ...ha
ebeb wrote: ↑Tue Mar 14, 2023 8:45 pm
Ok transferred the funds from SWVXX to SNSXX(SCHWAB US TREASURY MONEY MKT), much safer and only bit less yield. Can sleep better now
Why do you think that is safer?
I would start first by checking the “shadow NAV” of each fund.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
alex_686 wrote: ↑Wed Mar 15, 2023 4:41 pm
Why do you think that is safer?
I would start first by checking the “shadow NAV” of each fund.
Not just me look at the outflows/inflows for these two funds today -3.3B and +2B so maybe lot more people think SNSXX is safer and I dont know what is shadow NAV
alex_686 wrote: ↑Wed Mar 15, 2023 4:41 pm
Why do you think that is safer?
I would start first by checking the “shadow NAV” of each fund.
Not just me look at the outflows/inflows for these two funds today -3.3B and +2B so maybe lot more people think SNSXX is safer and I dont know what is shadow NAV
At the very least, maybe you're helping Schwab in their present difficulties by saving them a little bit in their interest payments. (I moved a little bit myself, after checking at their portfolios on the mutual fund comparison on the Schwab site.)
Here are the footnotes I see when trading schwab MMF on tdameritrade. (I underlined the differences).
1 You could lose money by investing in a money market fund. Although the fund seeks to preserve the value of your investment at $1 per share, it cannot guarantee it will do so. The fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the fund's liquidity falls below required minimums because of market conditions or other factors. An investment in the fund is not insured or guaranteed by the FDIC or any other government agency. The fund's sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.
2 You could lose money by investing in a money market fund. Although the fund seeks to preserve the value of your investment at $1 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the FDIC or any other government agency. The fund's sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.
3 You could lose money by investing in a money market fund. Because the share price of the fund will fluctuate, when you sell your shares they may be worth more or less than what you originally paid for them. The fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the fund's liquidity falls below required minimums because of market conditions or other factors. An investment in the fund is not insured or guaranteed by the FDIC or any other government agency. The fund's sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.
For instance SNSXX is footnote 2. SWVXX is footnote 1. And a mmf with a floating nav would be footnote 3.
ebeb wrote: ↑Tue Mar 14, 2023 8:45 pm
Ok transferred the funds from SWVXX to SNSXX(SCHWAB US TREASURY MONEY MKT), much safer and only bit less yield. Can sleep better now
I used to think that Treasuries were "much safer" but with all of the current talk about not raising the debt limit I am no longer sure of that.
alex_686 wrote: ↑Wed Mar 15, 2023 4:41 pm
Why do you think that is safer?
I would start first by checking the “shadow NAV” of each fund.
Not just me look at the outflows/inflows for these two funds today -3.3B and +2B so maybe lot more people think SNSXX is safer and I dont know what is shadow NAV
I am guessing shadow NAV is the same as market NAV. It was $1.0001 on 3/16.
alex_686 wrote: ↑Wed Mar 15, 2023 4:41 pm
Why do you think that is safer?
I would start first by checking the “shadow NAV” of each fund.
Not just me look at the outflows/inflows for these two funds today -3.3B and +2B so maybe lot more people think SNSXX is safer and I dont know what is shadow NAV
At the very least, maybe you're helping Schwab in their present difficulties by saving them a little bit in their interest payments. (I moved a little bit myself, after checking at their portfolios on the mutual fund comparison on the Schwab site.)
Schwab gets 0.34% per year in either case, the ER is the same for SNSXX and SWVXX. The interest you get is not coming from Schwab, it is coming from the securities held by the fund, which is passed through to you (less the 0.34% ER).
If anything, the trading would add to Schwab's costs, as they would have to sell SWVXX holdings in order to buy Treasury bills for SNSXX.
And so it goes, And so it goes, And so it goes, And so it goes, But where it's goin' no one knows
alex_686 wrote: ↑Wed Mar 15, 2023 4:41 pm
Why do you think that is safer?
I would start first by checking the “shadow NAV” of each fund.
Not just me look at the outflows/inflows for these two funds today -3.3B and +2B so maybe lot more people think SNSXX is safer and I dont know what is shadow NAV
I am guessing shadow NAV is the same as market NAV. It was $1.0001 on 3/16.
Well, no. The NAV was $1.0000. That is the point. You always buy and sell at $1.0000 even when the Net Asset Value is not $1.0000. On this case it looks like the fund is slightly overfunded, which is a good sign.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
alex_686 wrote: ↑Wed Mar 15, 2023 4:41 pm
Why do you think that is safer?
I would start first by checking the “shadow NAV” of each fund.
Not just me look at the outflows/inflows for these two funds today -3.3B and +2B so maybe lot more people think SNSXX is safer and I dont know what is shadow NAV
I am guessing shadow NAV is the same as market NAV. It was $1.0001 on 3/16.
Well, no. The NAV was $1.0000. That is the point. You always buy and sell at $1.0000 even when the Net Asset Value is not $1.0000. On this case it looks like the fund is slightly overfunded, which is a good sign.
jeffyscott wrote: ↑Sun Mar 19, 2023 9:17 am
Presumably this is what the true NAV would be, if it weren't artificially held to $1. Is this not what you meant by "shadow NAV"?
Yes. I am used to the older terminology. The point being this is where I would start if I was concerned about a fund’s viability. Overfunded is good.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
jeffyscott wrote: ↑Sun Mar 19, 2023 9:17 am
Presumably this is what the true NAV would be, if it weren't artificially held to $1. Is this not what you meant by "shadow NAV"?
Yes. I am used to the older terminology. The point being this is where I would start if I was concerned about a fund’s viability. Overfunded is good.
From the webpage, you will see that in last September, it was slightly underfunded with a market NAV of 0.9999 on 9/14 and 9/16 but it was 1.0000 on 9/15. So I guess some sort of rounding happened. It was down to 0.9997 at one point last October. Then it became overfunded throughout the rest of the year and this year.
jeffyscott wrote: ↑Sun Mar 19, 2023 9:17 am
Presumably this is what the true NAV would be, if it weren't artificially held to $1. Is this not what you meant by "shadow NAV"?
Yes. I am used to the older terminology. The point being this is where I would start if I was concerned about a fund’s viability. Overfunded is good.
From the webpage, you will see that in last September, it was slightly underfunded with a market NAV of 0.9999 on 9/14 and 9/16 but it was 1.0000 on 9/15. So I guess some sort of rounding happened. It was down to 0.9997 at one point last October. Then it became overfunded throughout the rest of the year and this year.
Probably not a rounding error. I have gotten into more than one discussion on Bogleheads about pricing and prices.
For context I have struck the NAV of a fund. Most systems go out to 8 digits internally.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Washington, D.C., Jan. 31, 2011 — The Securities and Exchange Commission today announced that investors can for the first time access detailed information that money market funds file with the Commission — including information about a fund's investments and the market-based price of its portfolio known as its "shadow NAV" (net asset value) or mark-to-market valuation.
jeffyscott wrote: ↑Sun Mar 19, 2023 9:17 am
Presumably this is what the true NAV would be, if it weren't artificially held to $1. Is this not what you meant by "shadow NAV"?
Yes. I am used to the older terminology. The point being this is where I would start if I was concerned about a fund’s viability. Overfunded is good.
From the webpage, you will see that in last September, it was slightly underfunded with a market NAV of 0.9999 on 9/14 and 9/16 but it was 1.0000 on 9/15. So I guess some sort of rounding happened. It was down to 0.9997 at one point last October. Then it became overfunded throughout the rest of the year and this year.
Probably not a rounding error. I have gotten into more than one discussion on Bogleheads about pricing and prices.
For context I have struck the NAV of a fund. Most systems go out to 8 digits internally.
I did not say rounding "error," I said rounding. If it goes from 0.9999->1.0000->0.9999 on day 1, 2 and 3, I am saying it is likely due to rounding. So it likely did not gain/lose 0.0001 value per share. It was probably something like 0.9999499999999 rounded to 0.9999 one day, then a gain of 0.0000000000001 gives 0.9999500000000, rounded to 1.0000. Since you mentioned most systems go out to 8 digits internally, I think we are saying the same thing.
ebeb wrote: ↑Tue Mar 14, 2023 8:45 pm
Ok transferred the funds from SWVXX to SNSXX(SCHWAB US TREASURY MONEY MKT), much safer and only bit less yield. Can sleep better now
I used to think that Treasuries were "much safer" but with all of the current talk about not raising the debt limit I am no longer sure of that.
Yeah seems now like the more proximate risk, relative to stuff in VMFXX anyway, is some kind of hang up wrt the debt ceiling standoff rather than the non-T-bill components. Although gauging the probability x market impact is difficult. The market itself seems to put that product below the background noise level at the moment. If you don't believe that's reliable because 'the market is short sighted', you can read about it in media w/ quotes from 'experts' but that has a lot of political spin IMO. But I don't see VMFXX as being more risky relative to VUSXX or direct bills than it normally is, might even be temporarily the other way around. A 'technical' default might mess up bill redemptions without messing up redemptions of short term agency debt, a lot of the 'govt obligations' in VMFXX. That money isn't being disbursed by the govt per se and the debt ceiling doesn't prevent those agencies from issuing more. Likewise, repo transactions might not be directly immediately affected. In a 'true' default treasuries might be the last thing to fall, but in 'technical' debt ceiling related one bill redemptions could have problems first.
But why have money in Schwab MM funds with 0.34% ER when VMFXX/VUSXX is 0.11%/.09%? I don't see a plausible reason for that unless it's too small an amount to bother moving, but OP said it was a significant amount.
Note: bulk of our cash reserve is in VUSXX and direct T-bills because after tax rate is best for us among very low risk things. The only precaution against debt ceiling trouble is a month or so's expenses in best yielding bank account (after tax APR 0.58% less than VUSXX for us), small % of total cash.
JackoC wrote: ↑Sun Mar 19, 2023 11:47 am
But why have money in Schwab MM funds with 0.34% ER when VMFXX/VUSXX is 0.11%/.09%? I don't see a plausible reason for that unless it's too small an amount to bother moving, but OP said it was a significant amount.
I fall into the camp of - dont believe Nobody because Nobody knows nothin' . So I split 50:50 funds between Vanguard and Schwab and need to keep these funds in Schwab albeit with less interest to avoid any disruptions in either brokerages if it ever happens. My most liquid is in moneymkt funds followed by lesser liquid amounts in TBills and then finally index funds.
JackoC wrote: ↑Sun Mar 19, 2023 11:47 am
But why have money in Schwab MM funds with 0.34% ER when VMFXX/VUSXX is 0.11%/.09%? I don't see a plausible reason for that unless it's too small an amount to bother moving, but OP said it was a significant amount.
I fall into the camp of - dont believe Nobody because Nobody knows nothin' . So I split 50:50 funds between Vanguard and Schwab and need to keep these funds in Schwab albeit with less interest to avoid any disruptions in either brokerages if it ever happens. My most liquid is in moneymkt funds followed by lesser liquid amounts in TBills and then finally index funds.
I don't have everything with one broker either, but I'd recommend accomplishing that some other way than eating Schwab's excessive ER on that MMF if possible. I have accounts at 4 brokers though Vanguard is the only where I have any cash (including bills) to speak of. But besides a month or so's expenses in best yielding bank money market acct, I could redeem I-bonds or the much larger amount I have in CD's as part of 'bonds', at quite favorable spreads to treasuries (by cherry picking the best rate anywhere when I bought them) at various bank/CU's. I'd pay Early Withdrawal Penalty and spoil those good rates but I'm talking about a true, highly unlikely, emergency like a big meltdown due to previously 'unknown unknown' risks at Vanguard, not 'emergency fund' for replacing the washing machine or something .
FWIW, I had a very large position in SWVXX and I'm in the process of leaving it for their Treasury Money Market Fund instead.
When I see what that fund is composed of, I simply don't like it. A lot of commercial paper for companies I've never heard of.
I'm not really worried and it doesn't keep me up at night, but if a few mouse clicks can take that .1% risk away, I think it's worthwhile. I would say I'm close to 100% certain that everybody would be made "whole" if something crazy happened, but i would not want to be involved in the drama or have the money tied up until that point.
Different scenario, but I remember in the 2008 crisis, my wife had a large amount of funds with Morgan Stanley and their Auction Rate security fiasco that they sort of positioned as a money market fund. It basically was frozen and there was a possibility she would just have to hold on to whatever junk bonds she was left with. It was part of the reason she finally left Morgan Stanley (but she was made whole).
is this really a threat? Doesn't SIPC kick in? I transferred the bulk of my tsp into schwab for the 1K promotion and its done well in swvxx but reading this, makes me worry. It's 500K and don't want to worry about it. Is the treasury money market really safer? This is in an ira - do they charge to move it?
Loon11 wrote: ↑Sun Mar 19, 2023 2:14 pm
is this really a threat? Doesn't SIPC kick in? I transferred the bulk of my tsp into schwab for the 1K promotion and its done well in swvxx but reading this, makes me worry. It's 500K and don't want to worry about it. Is the treasury money market really safer? This is in an ira - do they charge to move it?
Loon11 wrote: ↑Sun Mar 19, 2023 2:14 pm
is this really a threat? Doesn't SIPC kick in? I transferred the bulk of my tsp into schwab for the 1K promotion and its done well in swvxx but reading this, makes me worry. It's 500K and don't want to worry about it. Is the treasury money market really safer? This is in an ira - do they charge to move it?
No, SIPC does not kick in. That is for when your brokerage mislays your assets.
That being said, these funds are super safe because they invest in super safe assets.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Loon11 wrote: ↑Sun Mar 19, 2023 2:14 pm
is this really a threat? Doesn't SIPC kick in? I transferred the bulk of my tsp into schwab for the 1K promotion and its done well in swvxx but reading this, makes me worry. It's 500K and don't want to worry about it. Is the treasury money market really safer? This is in an ira - do they charge to move it?
SIPC is for brokerage fraud not if a fund goes down in value which is what we are discussing for SWVXX. Treasury should be safer than commercial paper invested by SWVXX.
Loon11 wrote: ↑Sun Mar 19, 2023 2:14 pm
is this really a threat? Doesn't SIPC kick in? I transferred the bulk of my tsp into schwab for the 1K promotion and its done well in swvxx but reading this, makes me worry. It's 500K and don't want to worry about it. Is the treasury money market really safer? This is in an ira - do they charge to move it?
There is no charge to exchange between funds. SIPC doesn't really protect you here, that is more for fraud. They guarantee that if you bought 1 share you really have 1 share. Whether that share has any value is not protected. Don't forget the treasury fund would be state tax free potentially cutting the difference in yield between the two funds.
thanks everyone. I may transfer to the treasury fund; however, the state tax break would not apply to an IRA I don't think, does it? When I need to take my RMD, there is no reduction for state if it's in treasury is there? that would be an added bonus.
alex_686 wrote: ↑Wed Mar 15, 2023 4:41 pm
Why do you think that is safer?
I would start first by checking the “shadow NAV” of each fund.
Not just me look at the outflows/inflows for these two funds today -3.3B and +2B so maybe lot more people think SNSXX is safer and I dont know what is shadow NAV
Where can you see the outflows/inflows on a daily basis? I would be interested in seeing this for VMFXX. Thanks.
S_Track wrote: ↑Sun Mar 19, 2023 3:42 pm
Where can you see the outflows/inflows on a daily basis? I would be interested in seeing this for VMFXX. Thanks.
S_Track wrote: ↑Sun Mar 19, 2023 3:42 pm
Where can you see the outflows/inflows on a daily basis? I would be interested in seeing this for VMFXX. Thanks.
S_Track wrote: ↑Sun Mar 19, 2023 3:42 pm
Where can you see the outflows/inflows on a daily basis? I would be interested in seeing this for VMFXX. Thanks.
.