Vanguard - Money Market Funds

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abuss368
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Vanguard - Money Market Funds

Post by abuss368 » Mon Mar 13, 2017 10:19 pm

Bogleheads -

With the gradual increase in interest rates and the resulting slightly higher distributions of the Vanguard Prime Money Market fund, how many Bogleheads are using a money market fund in place of a bank savings account?
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Noobvestor
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Re: Vanguard - Money Market Funds

Post by Noobvestor » Mon Mar 13, 2017 11:57 pm

Still too much hassle for me - I'll take lazy over a bit more return on cash.
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lack_ey
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Re: Vanguard - Money Market Funds

Post by lack_ey » Tue Mar 14, 2017 12:17 am

The rates aren't high enough yet. Maybe later, if banks are slow to raise savings account rates, which I assume they would be.

Actually, this all just makes (very) short term bonds viable again.

trasmuss
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Re: Vanguard - Money Market Funds

Post by trasmuss » Tue Mar 14, 2017 4:46 am

I do and have since the mid 1980's. The higher interest rates are nice but another main reason I use a money market in my taxable account is the ease in transferring money to and from other accounts (including our checking account). If the checking account gets too big I transfer some to the money market and visa versa. Works for me. Yes, you can set it up with Vanguard to do the same thing with a savings account but the bank I'm with pays so little that it isn't worth opening one up.

JohnFiscal
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Re: Vanguard - Money Market Funds

Post by JohnFiscal » Tue Mar 14, 2017 7:13 am

I used to keep a lot of cash in the Vanguard MMF, have had the account since 1988. Sometimes probably "too much" cash, but then as rates went down I kept more cash in ING Orange online checking and saving, which paid around 1% (and is now owned by Capital One as "360"). Trying to get more 'with it', just last year I moved a lot of lazy cash (~$200K) into ST and IT bond funds at Vanguard. Of course, bond rates immediately tanked.

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yukonjack
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Re: Vanguard - Money Market Funds

Post by yukonjack » Tue Mar 14, 2017 8:30 am

I am currently using it. I switched over about 6 months ago from a capital one account. While the rate may not be the best it is convenient having it under one roof with my other accounts.

wassabi
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Re: Vanguard - Money Market Funds

Post by wassabi » Tue Mar 14, 2017 10:54 am

I recently started using the Vanguard Federal Money Market Fund (VMFXX), which is my settlement fund (and not be confused with Vanguard Prime Money Market Fund (VMMXX). VMFXX has a rate of .51% but an expense ratio of .11%. I don't recall if the ER is already factored into the .51% rate.

At any rate (no pun intended), I started using the settlement fund as a convenient way of keeping some dollars in Vanguard. I have some bond fund shares in my taxable account and take the dividends monthly into the settlement account to reduce the amount of tax lots with the bond fund as well as reinvest those dividends into my annual Roth IRA contribution.

Is the Vanguard money market fund much more convenient than using my bank? Not really. But, the rate difference is so minor for the small amount of dollars that the little convenience I get is worth it. I like reinvesting dividends from taxable bonds into a Roth IRA contribution.

I'd like to see the money market rates continue closing the gap with savings accounts to reduce the number of accounts I have. Right now I used Navy Federal for checking but their savings rates aren't very good so I keep Ally around for a high yield savings. But as mentioned above, the rate difference is no minor on the amount of dollars I keep in cash that the extra interest amounts to probably $100 every year. I'll sacrifice that amount (less after taxes) for convenience and to consolidate funds into fewer accounts.

iloveramen
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Re: Vanguard - Money Market Funds

Post by iloveramen » Wed Mar 15, 2017 1:54 pm

I am currently debating on moving the majority of my cash into the Vanguard Prime Money Market "VMMXX" in my taxable brokerage account at Vanguard. I get very little interest from my savings account at my credit union. I do not want to do an online savings because that will be another account to maintain.

mindboggling
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Re: Vanguard - Money Market Funds

Post by mindboggling » Wed Mar 15, 2017 2:05 pm

Vanguard's Federal Money Market Reserve was my first Vanguard account (opened 1987). I still use it. It's another account I can write a check on if I need to. I also have a high-yield savings account at Synchrony Bank (1.05%).

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BW1985
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Re: Vanguard - Money Market Funds

Post by BW1985 » Wed Mar 15, 2017 2:08 pm

yukonjack wrote:I am currently using it. I switched over about 6 months ago from a capital one account. While the rate may not be the best it is convenient having it under one roof with my other accounts.
+1. And it's quickly accessible if I want to make an investment versus transferring in from a bank.
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flamesabers
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Re: Vanguard - Money Market Funds

Post by flamesabers » Wed Mar 15, 2017 2:16 pm

I haven't had a savings account for about nine or ten years. Back when I got a decent interest rate on my checking account, that account doubled as a savings account. Since I don't get interest on my checking account anymore (the bank put on more rules then I could reasonably comply with) I use a Vanguard Money Market Fund to as my savings account. I like having my 'savings account' in the same spot as the rest of my investments for the sake of simplicity. Plus, I get free checks with the money market account. :happy

SpideyIndexer
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Re: Vanguard - Money Market Funds

Post by SpideyIndexer » Fri Apr 07, 2017 4:49 pm

If you are in a high tax bracket, consider VG's muncipal MMFs. The federal tax-free has an SEC yield of 0.77% and there are fed/state tax free ones for some states. Pretty good deals, just no rate guarantees and no FDIC insurance.

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Re: Vanguard - Money Market Funds

Post by TropikThunder » Fri Apr 07, 2017 5:59 pm

abuss368 wrote:Bogleheads -

With the gradual increase in interest rates and the resulting slightly higher distributions of the Vanguard Prime Money Market fund, how many Bogleheads are using a money market fund in place of a bank savings account?
Am I missing something? Not one responder has an issue with the MM funds not being FDIC/NCUA insured? How much higher yield does one require to compensate for the risk? I'm not concerned about VG going bankrupt but still, Savings Accounts should be zero risk.

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Bob B
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Re: Vanguard - Money Market Funds

Post by Bob B » Fri Apr 07, 2017 7:15 pm

wassabi wrote: VMFXX has a rate of .51% but an expense ratio of .11%. I don't recall if the ER is already factored into the .51% rate.
Yes, it is so don't make the mistake of subtracting .11 from .51.
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dm200
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Re: Vanguard - Money Market Funds

Post by dm200 » Fri Apr 07, 2017 7:42 pm

TropikThunder wrote:
abuss368 wrote:Bogleheads -
With the gradual increase in interest rates and the resulting slightly higher distributions of the Vanguard Prime Money Market fund, how many Bogleheads are using a money market fund in place of a bank savings account?
Am I missing something? Not one responder has an issue with the MM funds not being FDIC/NCUA insured? How much higher yield does one require to compensate for the risk? I'm not concerned about VG going bankrupt but still, Savings Accounts should be zero risk.
Money Market funds (as are all mutual funds) have the value of the holdings. This is very different than an account at a bank or credit union. A bank or credit union account is the general, overall obligation of the bank or credit union. There are no direct ties to the amount in the account with particular assets of the bank or credit union. So, a bank or credit union could make some bad decisions on spending a lot of money, entering into a contracts that costs them a lot - and the overall worth of the bank or credit union could cause the bank or credit union (without the NCUA or FDIC backing) to be unable to pay you the amount of money on deposit.

Dandy
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Re: Vanguard - Money Market Funds

Post by Dandy » Fri Apr 07, 2017 9:53 pm

Not me for several reasons
1. better rates with online banks e.g. 1% or more vs 0.80%.
2. No FDIC guarantee
3. No guarantee not to break a buck
4. In a financial crisis might be some restrictions on getting your money -- or getting it when it breaks a buck --just when you might need it.

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Re: Vanguard - Money Market Funds

Post by Dandy » Fri Apr 07, 2017 9:55 pm

.duplicate post

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