VMFXX Settlement Fund versus VMFXX Mutual Fund

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playboy_number9
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VMFXX Settlement Fund versus VMFXX Mutual Fund

Post by playboy_number9 »

Is there a difference in letting my idle cash sit in Vanguard VMFXX Settlement Fund versus actually buying the mutual fund?
ehh
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Re: VMFXX Settlement Fund vs Mutual Fund

Post by ehh »

Aside from the money in the settlement fund being a bit more accessible (and therefore useful), no.

Can you even create a second instance of VMFXX within a Vanguard Brokerage Account?
Mike Scott
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Re: VMFXX Settlement Fund vs Mutual Fund

Post by Mike Scott »

No difference. You can do both.
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retired@50
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Re: VMFXX Settlement Fund vs Mutual Fund

Post by retired@50 »

playboy_number9 wrote: Fri Apr 05, 2024 1:05 pm Is there a difference in letting my idle cash sit in Vanguard VMFXX Settlement Fund versus actually buying the mutual fund?
No difference between settlement fund and VMFXX, but if you're subject to state level income taxes, then putting your idle cash in VUSXX may help.

Since VUSXX is a Treasury money market fund, much (or possibly all) of the interest it earns isn't subject to state income taxes.

See link: https://investor.vanguard.com/investmen ... file/vusxx

Regards,
Last edited by retired@50 on Fri Apr 05, 2024 3:50 pm, edited 1 time in total.
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barnaclebob
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Re: VMFXX Settlement Fund vs Mutual Fund

Post by barnaclebob »

I use the money market mutual fund as a specific bucket that im putting former extra principle mortgage payments into because the rate is better.

But no there's no difference.
nyejos11
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Re: VMFXX Settlement Fund vs Mutual Fund

Post by nyejos11 »

I have both the settlement fund and separate Vmfxx. I don’t know why but it’s there. Does anyone know what the purpose of them offering both if they are the same thing? It’s kind of confusing.
Geologist
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Re: VMFXX Settlement Fund vs Mutual Fund

Post by Geologist »

nyejos11 wrote: Fri Apr 05, 2024 7:33 pm I have both the settlement fund and separate Vmfxx. I don’t know why but it’s there. Does anyone know what the purpose of them offering both if they are the same thing? It’s kind of confusing.
Is it possible that you had the Vanguard Federal Money Market Fund when you were on the mutual fund platform? Then on conversion to the brokerage platform, you would automatically have gotten the settlement fund and retained the Federal Money Market account. Something similar happened to me: I had the old Prime Money Market fund on the mutual fund platform and then had it and the settlement fund (Federal Money Market) once I transitioned to the brokerage platform. Relatively soon, I saw that the duplication was of no benefit to me and transferred all my funds out of the Prime MM.

As barnaclebob has already posted, some people do find it convenient to have a separate account for VMFXX from the settlement account.
nyejos11
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Re: VMFXX Settlement Fund vs Mutual Fund

Post by nyejos11 »

I never had the mutual fund platform, I started out with a brokerage account
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retired@50
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Re: VMFXX Settlement Fund vs Mutual Fund

Post by retired@50 »

nyejos11 wrote: Fri Apr 05, 2024 7:33 pm I have both the settlement fund and separate Vmfxx. I don’t know why but it’s there. Does anyone know what the purpose of them offering both if they are the same thing? It’s kind of confusing.
You can always sell the individual VMFXX holding, and put the proceeds into the settlement fund, assuming you'd find that less confusing.

Regards,
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user2000
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Let's say I have one of the new style Vanguard accounts

Post by user2000 »

[Thread merged into here --admin LadyGeek]

Let's say I have one of the new style Vanguard accounts that comes with a sweep balance aka Settlement Fund. The default holding spot for sweep money is "Vanguard Federal Money Market Fund (Settlement Fund)".

Consider two options:

(a) I keep all my money in the Settlement Fund which is Vanguard Federal Money Market Fund

(b) I use the balance in the Settlement Fund to purchase "VMFXX Vanguard Federal Money Market Fund", fund number 0033

Am I right that there is no difference here? Is there any reason for me to do "a" vs "b" pros and cons?

Thanks,
J
ehh
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Re: Let's say I have one of the new style Vanguard accounts

Post by ehh »

No difference.

Some people like to keep two separate pots of cash. For example, one pot representing their emergency fund and one pot representing cash available to purchase investments or to spend.

Here is a recent thread: viewtopic.php?t=429054 A search will find additional threads regarding this topic.
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sycamore
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Re: Let's say I have one of the new style Vanguard accounts

Post by sycamore »

Keep it simple and do option (a).

You have a Vanguard brokerage account. Use it the way it was designed.

Option (b) is more work and will make things more confusing.

I'm not sure why you would entertain such a notion. Then again I've been using a brokerage for 35+ years so I'm used to the quirks of having a settlement fund.

Please share why you'd want to do option (b).
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BolderBoy
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Re: Let's say I have one of the new style Vanguard accounts

Post by BolderBoy »

user2000 wrote: Sun Apr 07, 2024 6:38 pm (a) I keep all my money in the Settlement Fund which is Vanguard Federal Money Market Fund

(b) I use the balance in the Settlement Fund to purchase "VMFXX Vanguard Federal Money Market Fund", fund number 0033

Am I right that there is no difference here?
You are right. Leave it in (a). If you want finer MM tuning, consider moving it to VUSXX.

What state do you live in?
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rob
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Re: Let's say I have one of the new style Vanguard accounts

Post by rob »

sycamore wrote: Sun Apr 07, 2024 7:56 pm Please share why you'd want to do option (b).
Because - last I knew - Vanguard does not let you pick a settle fund - so if you wanted tax exempt MM or something different from the default then you would have to do option(b).
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Blake7
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Re: Let's say I have one of the new style Vanguard accounts

Post by Blake7 »

I don’t see any point in having VFMXX in a separate fund within the same brokerage account.

On a side note, I’m just glad the VG’s sweep account is something like VMFXX rather than a bank account that pay’s 0.0X% like Schwab and most other brokerages offer, and who rake in millions collectively on the float until the money is moved again into a fund that pays something half decent. It’s a major reason why I’ve stuck with VG. I’m quite sure the reason other brokerages offer those enticing transfer bonuses is they know they’ll claw back the money this and other ways over time.
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sycamore
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Re: Let's say I have one of the new style Vanguard accounts

Post by sycamore »

rob wrote: Sun Apr 07, 2024 9:01 pm
sycamore wrote: Sun Apr 07, 2024 7:56 pm Please share why you'd want to do option (b).
Because - last I knew - Vanguard does not let you pick a settle fund - so if you wanted tax exempt MM or something different from the default then you would have to do option(b).
That makes some sense. But the OP is asking about buying the same fund as as the settlement fund, not a different one.
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Re: VMFXX Settlement Fund versus VMFXX Mutual Fund

Post by LadyGeek »

I merged user2000's thread into a similar discussion. I also clarified the thread title. The combined thread is now in the Investing - Theory, News & General forum (general discussion).

(Thanks to the member who reported the post and provided a link to this thread.)
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mariezzz
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Re: Let's say I have one of the new style Vanguard accounts

Post by mariezzz »

rob wrote: Sun Apr 07, 2024 9:01 pm
sycamore wrote: Sun Apr 07, 2024 7:56 pm Please share why you'd want to do option (b).
Because - last I knew - Vanguard does not let you pick a settle fund - so if you wanted tax exempt MM or something different from the default then you would have to do option(b).
Some people CAN change their settlement fund, but it seems it's by invite. VMFXX has the much better yield right now.
Discussion here: www.bogleheads.org/forum/viewtopic.php?t=396706
investor.vanguard.com/investment-products/vanguard-cash-deposit
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zaplunken
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Re: VMFXX Settlement Fund versus VMFXX Mutual Fund

Post by zaplunken »

I keep all the cash in the Settlement Fund. You can buy treasuries or CDs using the Settlement Fund, you can not do that with money in the VMFXX mutual fund, you need to move the mutual fund money into the Settlement Fund. It seems odd way to do things but that is what I learned 2 years ago when I tried to buy a treasury bill from the mutual fund and couldn't do it.
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LittleStarSF
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Re: VMFXX Settlement Fund versus VMFXX Mutual Fund

Post by LittleStarSF »

Glad I found this thread. When doing a backdoor Roth IRA conversion this year, with Vanguard's new UI, the only option for buying into the Traditional IRA that worked for me seemed to be to buy shares of VMFXX. Then after I converted to the Roth IRA, it was listed as a fund next to my other funds (b), whereas in the past the money appeared in the settlement fund of the Roth IRA (a), so I was a bit confused.
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Re: VMFXX Settlement Fund versus VMFXX Mutual Fund

Post by maj »

Good to see this topic discussed.

Making mandatory IRA withdrawals from the Settlement MM Fund messed up when that balance was too low, and the withdrawal was not made as scheduled.

Trying to straighten this out (and avoid IRS complications ) took three phone calls to three different vg reps.
It was the third rep who explained that my regular MM had plenty of cash to cover the withdrawals but I had failed to transfer the cash from the regular MM to the Settlement MM Fund.
She explained that the Settlement fund is also used to transfer monies between my bank and my Vanguard account.

I asked her to transfer all cash from my regular MM Fund to the Settlement MM Fund, and to close the regular MM Fund.
Said she would make the transfer as requested but that the regular MM had to remain even though I would not use it again.

All is now ok with the IRA withdrawals. Bless that lady, whoever she is.

Peace
PatrickA5
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Re: VMFXX Settlement Fund versus VMFXX Mutual Fund

Post by PatrickA5 »

Sister-in-law inherited some money and it ended up some in VMFXX and some in the settlement fund (Also VMFXX). I handle her finances, but I don't think I'm going to mess with combining. When I went out to sell the VMFXX and let it all ride in the settlement fund it warned that doing so might mess up the automatic withdrawals we have coming out.
maj
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Re: VMFXX Settlement Fund versus VMFXX Mutual Fund

Post by maj »

PatrickA5,
Thanks for your post.
I'm surprised about the warning you received.
I'll check my account for accuracy.
rkhusky
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Re: VMFXX Settlement Fund versus VMFXX Mutual Fund

Post by rkhusky »

PatrickA5 wrote: Mon Feb 03, 2025 3:06 pm Sister-in-law inherited some money and it ended up some in VMFXX and some in the settlement fund (Also VMFXX). I handle her finances, but I don't think I'm going to mess with combining. When I went out to sell the VMFXX and let it all ride in the settlement fund it warned that doing so might mess up the automatic withdrawals we have coming out.
Change the automatic withdrawal to come from the settlement fund and then move the funds there.
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