Vanguard Money Market 0.11 ER

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ERMD
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Vanguard Money Market 0.11 ER

Post by ERMD » Wed Dec 28, 2016 5:53 pm

Just noticed this when logging onto my Vanguard account today:
As of 12/23/2016, the expense ratio on your Vanguard Federal Money Market Fund has changed from 0.00% to 0.11%.
My money market settlement account will now have a higher expense ratio than any of my index funds.

My question is.. what gives? :confused
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livesoft
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Re: Vanguard Money Market 0.11 ER

Post by livesoft » Wed Dec 28, 2016 6:01 pm

ERMD wrote:My question is.. what gives? :confused
Does it have more features than your index funds? Does it have more transactions? Does it have lower total assets, so costs are spread over fewer total dollars? Does it have some kind of guarantee not to break the buck? Is the average account amount much lower than for index funds? Does it have a lower initial minimum, you know, like $0.00?

Do you even have any money in it?
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Rob5TCP
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Re: Vanguard Money Market 0.11 ER

Post by Rob5TCP » Wed Dec 28, 2016 6:05 pm

The Vanguard fund I believe had a zero cost when yields were practically nothing.
Now that yields have returned, somewhat, to a higher level that are charging a very reasonable amount for a moneymarket.
Be aware though, moneymarkets CAN break the $1 level. It's rare, but it can happen and Vanguard (as do most if not all moneymarket accounts)
state the same thing.

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Re: Vanguard Money Market 0.11 ER

Post by whodidntante » Wed Dec 28, 2016 6:06 pm

I have 3 cents in my core position. How much do you have?

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Re: Vanguard Money Market 0.11 ER

Post by triceratop » Wed Dec 28, 2016 6:07 pm

ERMD wrote:Just noticed this when logging onto my Vanguard account today:
As of 12/23/2016, the expense ratio on your Vanguard Federal Money Market Fund has changed from 0.00% to 0.11%.
My money market settlement account will now have a higher expense ratio than any of my index funds.

My question is.. what gives? :confused
I think your Vanguard account dialog is lying; it has happened before.

The expense ratio is listed as 0.11% in December 14, 2015 per the 08/31/2016 annual report. Realized expenses were 0.11% through 08/31/2016.
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Re: Vanguard Money Market 0.11 ER

Post by Geologist » Wed Dec 28, 2016 8:48 pm

ERMD wrote:
My money market settlement account will now have a higher expense ratio than any of my index funds.

My question is.. what gives? :confused
Money market accounts can have checks written on them, whether you write such checks or not. Processing those checks costs money. If you look in the annual report for Vanguard's money market funds, you will see that the purchases and redemptions come close to the total assets of the fund in nearly every year. (The turnover of shareholder funds in stock or bond index funds is less.) Processing those shareholder transactions costs money.

Consequently, it isn't surprising that money market funds have higher expense ratios.

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Re: Vanguard Money Market 0.11 ER

Post by abuss368 » Wed Dec 28, 2016 8:58 pm

I removed our Prime Money Market funds many years ago. This provided better returns and less complexity. I use the bank for our cash management needs.
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lack_ey
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Re: Vanguard Money Market 0.11 ER

Post by lack_ey » Wed Dec 28, 2016 9:04 pm

You know, there's necessarily significant turnover in money market funds, some due diligence required in security selection, and so on.

Geologist wrote:Money market accounts can have checks written on them, whether you write such checks or not. Processing those checks costs money. If you look in the annual report for Vanguard's money market funds, you will see that the purchases and redemptions come close to the total assets of the fund in nearly every year. (The turnover of shareholder funds in stock or bond index funds is less.) Processing those shareholder transactions costs money.

Consequently, it isn't surprising that money market funds have higher expense ratios.
Vanguard (the brokerage/mutual fund services provider) allows checkwriting out of some bond funds too (or at least they did when I looked a year or so ago), not just money market funds.

In any case, a lot of people seem to be citing brokerage-related costs, but the Vanguard funds could be held at any number of different institutions and Vanguard Brokerage Services (and I guess the old mutual fund platform) is not the same thing as the Vanguard funds themselves.


In any case as many mention, even Prime Money Market has a lower rate than bank accounts so there's a question of why you'd deliberately keep any substantial amount of money worth caring about here anyway. Unless maybe you're talking net worth in 8 figures where you might actually not want to deal with more bank accounts under FDIC limits with high rates and in that case, um... don't you have better things to worry about at that point anyway?

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Re: Vanguard Money Market 0.11 ER

Post by Geologist » Wed Dec 28, 2016 9:21 pm

lack_ey wrote:You know, there's necessarily significant turnover in money market funds, some due diligence required in security selection, and so on.

Geologist wrote:Money market accounts can have checks written on them, whether you write such checks or not. Processing those checks costs money. If you look in the annual report for Vanguard's money market funds, you will see that the purchases and redemptions come close to the total assets of the fund in nearly every year. (The turnover of shareholder funds in stock or bond index funds is less.) Processing those shareholder transactions costs money.

Consequently, it isn't surprising that money market funds have higher expense ratios.
Vanguard (the brokerage/mutual fund services provider) allows checkwriting out of some bond funds too (or at least they did when I looked a year or so ago), not just money market funds.
If you are now on the brokerage platform, then you can't write checks on any funds other than the settlement money market fund. On the mutual fund platform, you can still write checks on bond funds, but a) that forces average cost basis and b) I'll bet that the volume of checks written on bond funds is small. After all, as I already said, the redemption value of bond funds each year is less than the total assets and the redemption value of money market funds [which is not just checks, it is true] approximates total assets.

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ERMD
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Re: Vanguard Money Market 0.11 ER

Post by ERMD » Thu Dec 29, 2016 11:59 am

Thanks for the responses. It's primarily my settlement account, and I don't keep anything in here long term (I believe it was my default settlement account). I rarely have any money there at all -- was just curious about the change.
between scotch and nothing, i'll take scotch. -- faulkner

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