Best options for cash in Schwab brokerage accounts?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
MnD
Posts: 5194
Joined: Mon Jan 14, 2008 11:41 am

Best options for cash in Schwab brokerage accounts?

Post by MnD »

I don't keep much cash in Schwab accounts, but also don't walk past $1's, $5's and $10's lying in the street.
Both the Bank sweep and Schwab One sweep interest rates are awful at 0.12%.

Schwab Purchased Money Market funds with no minimum balance include:
Schwab Value Advantage Money Fund SWVXX 1.30%
Schwab Government Money Fund SNVXX 0.97%
Schwab Municipal Money Fund SWTXX 0.74%

Anything I'm missing? I have a high yielding on-line savings account elsewhere, so just focusing on relatively small cash levels at Schwab.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
User avatar
Nate79
Posts: 9372
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Best options for cash in Schwab brokerage accounts?

Post by Nate79 »

I'm interested in this question as well.
onourway
Posts: 3778
Joined: Thu Dec 08, 2016 2:39 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by onourway »

SWVXX is the best I am aware of. It pretty much trails the Vanguard Prime account by the difference in their expense ratios. 0.41% is a big chunk from a MM fund!
Jack FFR1846
Posts: 18499
Joined: Tue Dec 31, 2013 6:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Best options for cash in Schwab brokerage accounts?

Post by Jack FFR1846 »

Transfers into and out of Schwab are faster than anyplace I'm aware of. If I transfer today, it's at it's destination the next day. So what I do is buy the ETFs I want (Friday, I bought $5k of SCHB), then transfer the remaining back to Ablebanking's 1.7% savings account.

I pick pennies off the sidewalk.
Bogle: Smart Beta is stupid
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Best options for cash in Schwab brokerage accounts?

Post by dbr »

The best option for cash is to invest it in something else that offers better return. Why are you asking this?

Another really good option is to take out the money and spend it.
SlowMovingInvestor
Posts: 3486
Joined: Sun Sep 11, 2016 11:27 am

Re: Best options for cash in Schwab brokerage accounts?

Post by SlowMovingInvestor »

dbr wrote: Sat Feb 10, 2018 11:47 am The best option for cash is to invest it in something else that offers better return. Why are you asking this?
There are reasons why you might want to leave cash at a brokerage (rather than transferring to a bank). Meeting account balance limits for bonuses is a good example.
Alan S.
Posts: 12669
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Best options for cash in Schwab brokerage accounts?

Post by Alan S. »

I have moved all cash out of these sweep funds to Val Adv.

FDIC insurance on bank sweep funds and not breaking the buck are not worth taking the interest rate hit, short of true crisis conditions. But MM reform is definitely a little inconvenient, making all purchases and sales into a two step process.

I imagine that active traders are not happy, since they are likely forced into heavy use of these low yielding sweep funds.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Best options for cash in Schwab brokerage accounts?

Post by dbr »

SlowMovingInvestor wrote: Sat Feb 10, 2018 12:11 pm
dbr wrote: Sat Feb 10, 2018 11:47 am The best option for cash is to invest it in something else that offers better return. Why are you asking this?
There are reasons why you might want to leave cash at a brokerage (rather than transferring to a bank). Meeting account balance limits for bonuses is a good example.
Well, in that case a person would do whatever makes the most sense to keep the bonus, which would presumably include the possibility of investing in something.
Topic Author
MnD
Posts: 5194
Joined: Mon Jan 14, 2008 11:41 am

Re: Best options for cash in Schwab brokerage accounts?

Post by MnD »

onourway wrote: Sat Feb 10, 2018 11:32 am SWVXX is the best I am aware of. It pretty much trails the Vanguard Prime account by the difference in their expense ratios. 0.41% is a big chunk from a MM fund!
Currently waived lower to net .35% "for so long as the investment adviser (Charles Schwab Investment Management Inc.) serves as the adviser to the fund". But yes, that's 19 basis points more than VMMXX at .16%, and accounts for the difference in yield.
http://hosted.rightprospectus.com/SF/Fu ... =808515605
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
rixer
Posts: 758
Joined: Tue Sep 11, 2012 4:18 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by rixer »

When I have small amounts of cash sitting in there, I just put it in the Schwab total stock index fund. It's not usually enough to throw off my AA.
User avatar
BigFoot48
Posts: 3114
Joined: Tue Feb 20, 2007 9:47 am
Location: Arizona

Re: Best options for cash in Schwab brokerage accounts?

Post by BigFoot48 »

In February Schwab changed the vehicle the cash in my brokerage and IRA accounts are automatically invested in from Schwab Cash Reserves Sweep to the FDIC-insured Bank Sweep. (They had sent me two letters saying this was coming.)

The result is that cash is now earning 0.12% vs. the 0.88% it previously earned. This has gotten my attention as to keeping the cash balance at a reasonable amount to fund monthly expenses, and to decide which fund to keep cash not needed for months invested in. Based in this thread and others it appears that Schwab Value Advantage Money Fund - Investor Shares SWVXX, currently earning 1.36%, is the way to go.

Any comments on this?
Last edited by BigFoot48 on Mon Mar 05, 2018 2:17 pm, edited 1 time in total.
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 18-time loser
User avatar
Nate79
Posts: 9372
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Best options for cash in Schwab brokerage accounts?

Post by Nate79 »

BigFoot48 wrote: Mon Mar 05, 2018 11:27 am In February Schwab changed the vehicle the cash in my brokerage and IRA accounts are automatically invested in from Schwab Cash Reserves Sweep to the FDIC-insured Bank Sweep. (They had sent me two letters saying this was coming.)

The result is that cash is now earning 0.12% vs. the 0.88% it previously earned. This has gotten my attention as to keeping the cash balance at a reasonable amount to fund monthly expenses, and to decide which fund to keep cash not needed for months invested in. Based on this thread and others it appears that Schwab Value Advantage Money Fund - Investor Shares SWVXX currently earning 1.36% is the way to go.

Any comments on this?
After this thread started I started using SWVXX for extra cash in my Schwab brokerage accounts. Seems like a fine choice to me.
User avatar
F150HD
Posts: 3926
Joined: Fri Sep 18, 2015 7:49 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by F150HD »

One frustration I have with Schwab is that excess cash isn't automatically put into a 'sweep account', you have to literally put in a purchase order to move your cash into SWVXX for example (they treat it like buying a 'mutual fund'). Maybe this is a standard I've never seen? but anywhere else I have accounts, excess cash is automatically put into a sweep account to earn interest etc. you don't have to manually put in a "Buy" order as you would purchasing a stock or fund.

Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.

Maybe someone more in the know then I can comment on this? Thanks.
Long is the way and hard, that out of Hell leads up to light.
User avatar
Nate79
Posts: 9372
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Best options for cash in Schwab brokerage accounts?

Post by Nate79 »

F150HD wrote: Mon Mar 05, 2018 11:55 am One frustration I have with Schwab is that excess cash isn't automatically put into a 'sweep account', you have to literally put in a purchase order to move your cash into SWVXX for example (they treat it like buying a 'mutual fund'). Maybe this is a standard I've never seen? but anywhere else I have accounts, excess cash is automatically put into a sweep account to earn interest etc. you don't have to manually put in a "Buy" order as you would purchasing a stock or fund.

Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.

Maybe someone more in the know then I can comment on this? Thanks.
Here is Schwab's summary page for sweep accounts.
https://client.schwab.com/secure/cc/pro ... t_services

Uninvested cash is swept automatically into FDIC insured accounts earning 0.12% - 0.30% APY.

If you want to take the cash and invest in something that earns more then yes, you need to purchase the mutual fund like SWVXX. I don't think you can have this done automatically.

They do have sweep accounts that can go into higher earning options but this appears to be only for specific types of accounts:
https://client.schwab.com/secure/cc/pro ... t_services
User avatar
BigFoot48
Posts: 3114
Joined: Tue Feb 20, 2007 9:47 am
Location: Arizona

Re: Best options for cash in Schwab brokerage accounts?

Post by BigFoot48 »

F150HD wrote: Mon Mar 05, 2018 11:55 am One frustration I have with Schwab is that excess cash isn't automatically put into a 'sweep account', you have to literally put in a purchase order to move your cash into SWVXX for example (they treat it like buying a 'mutual fund').
Yes, that is the annoyance that comes with this change. For about $120 extra earnings a year on a $10,000 cash balance kept in SWVXX vs. Reserves Sweep one would have to decide how often they want to optimize the balances in both.

Don't we all miss the days of high Money Market returns?
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 18-time loser
123
Posts: 10415
Joined: Fri Oct 12, 2012 3:55 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by 123 »

F150HD wrote: Mon Mar 05, 2018 11:55 am One frustration I have with Schwab is that excess cash isn't automatically put into a 'sweep account', you have to literally put in a purchase order to move your cash into SWVXX for example (they treat it like buying a 'mutual fund'). Maybe this is a standard I've never seen? but anywhere else I have accounts, excess cash is automatically put into a sweep account to earn interest etc. you don't have to manually put in a "Buy" order as you would purchasing a stock or fund.

Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.

Maybe someone more in the know then I can comment on this? Thanks.
+1 I share you grief over such a simple thing as a default "sweep account". As much as I like Schwab and have used them for over 30 years the way they have mangled the handling of account cash balances over the last 5 (?) years is shameful. Used to be you had a default MMF and all was good. Then I think they wanted to bump-up deposits at Schwab Bank so they swept cash balances there and paid account owners a much lower interest rate. If you want to perserver you can purchase MMF shares. It does nothing to make investing easier, which is supposed to be what Schwab is about. Last year when we had a windfall we did not put it under the Schwab umbrella.
The closest helping hand is at the end of your own arm.
lack_ey
Posts: 6701
Joined: Wed Nov 19, 2014 10:55 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by lack_ey »

F150HD wrote: Mon Mar 05, 2018 11:55 am Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.
The purchased money market funds trade like mutual funds but with T+1 settlement date, so there's no delay to do what you say.

If you want to sell the money market fund to purchase something else, you can do both transactions on the same day and you will be fine. The money market fund settlement will be the next business day and the other asset probably the next business day after that (stocks, ETFs, most mutual funds are T+2, previously T+3).

However, if you want to sell something else to buy the money market fund, you'd have to wait a day for the buy order on the T+1 asset. If you do both on the same day, the T+1 settlement (the buy) will come first, and there won't be money to cover that transaction.

You could also use T-bills, which settle T+1. SWVXX has a 7-day yield of 1.36%. There are for example 3-month T-bills around 1.65%. Even if the money market yield creeps up the next few months, it's unlikely to beat the T-bill, though of course the latter has some very mild price volatility and nonzero but very small spreads if you actually need to sell early.

In general that is not going to matter much unless you're sitting on a lot of cash for some reason, like for a large expense in the near future. For longer-term needs, some bond fund is probably better.
User avatar
F150HD
Posts: 3926
Joined: Fri Sep 18, 2015 7:49 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by F150HD »

Nate79 wrote: Mon Mar 05, 2018 1:25 pm
F150HD wrote: Mon Mar 05, 2018 11:55 am One frustration I have with Schwab is that excess cash isn't automatically put into a 'sweep account', you have to literally put in a purchase order to move your cash into SWVXX for example (they treat it like buying a 'mutual fund'). Maybe this is a standard I've never seen? but anywhere else I have accounts, excess cash is automatically put into a sweep account to earn interest etc. you don't have to manually put in a "Buy" order as you would purchasing a stock or fund.

Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.

Maybe someone more in the know then I can comment on this? Thanks.
Here is Schwab's summary page for sweep accounts.
https://client.schwab.com/secure/cc/pro ... t_services

Uninvested cash is swept automatically into FDIC insured accounts earning 0.12% - 0.30% APY.

If you want to take the cash and invest in something that earns more then yes, you need to purchase the mutual fund like SWVXX. I don't think you can have this done automatically.

They do have sweep accounts that can go into higher earning options but this appears to be only for specific types of accounts:
https://client.schwab.com/secure/cc/pro ... t_services
Thanks. A phone rep gave me a looooooong story about this a month back when I called for something, it left me confused lol...anyway, I don't trade there much and still am not exceptionally fluent w/ their site. But their customer service is really nice thats for sure. (Fidelity too)
Long is the way and hard, that out of Hell leads up to light.
User avatar
F150HD
Posts: 3926
Joined: Fri Sep 18, 2015 7:49 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by F150HD »

123 wrote: Mon Mar 05, 2018 2:04 pm
F150HD wrote: Mon Mar 05, 2018 11:55 am One frustration I have with Schwab is that excess cash isn't automatically put into a 'sweep account', you have to literally put in a purchase order to move your cash into SWVXX for example (they treat it like buying a 'mutual fund'). Maybe this is a standard I've never seen? but anywhere else I have accounts, excess cash is automatically put into a sweep account to earn interest etc. you don't have to manually put in a "Buy" order as you would purchasing a stock or fund.

Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.

Maybe someone more in the know then I can comment on this? Thanks.
+1 I share you grief over such a simple thing as a default "sweep account". As much as I like Schwab and have used them for over 30 years the way they have mangled the handling of account cash balances over the last 5 (?) years is shameful. Used to be you had a default MMF and all was good. Then I think they wanted to bump-up deposits at Schwab Bank so they swept cash balances there and paid account owners a much lower interest rate. If you want to perserver you can purchase MMF shares. It does nothing to make investing easier, which is supposed to be what Schwab is about. Last year when we had a windfall we did not put it under the Schwab umbrella.
That nails it right there. Thanks for the info.

Yea there's something going on there I've struggled with since opening an account last summer (all for a bonus). kinda wish I'd have skipped the bonus! lol.... I find navigating their site and trade tickets cumbersome.

Simple things I struggle with on their site- like the image below. It completely eludes me how that search returns nothing on their site.

Image

MMF expense ratio is worth noting too....(unless this level is normal?)

Image
Long is the way and hard, that out of Hell leads up to light.
User avatar
F150HD
Posts: 3926
Joined: Fri Sep 18, 2015 7:49 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by F150HD »

lack_ey wrote: Mon Mar 05, 2018 2:09 pm
F150HD wrote: Mon Mar 05, 2018 11:55 am Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.
The purchased money market funds trade like mutual funds but with T+1 settlement date, so there's no delay to do what you say.

If you want to sell the money market fund to purchase something else, you can do both transactions on the same day and you will be fine. The money market fund settlement will be the next business day and the other asset probably the next business day after that (stocks, ETFs, most mutual funds are T+2, previously T+3).

However, if you want to sell something else to buy the money market fund, you'd have to wait a day for the buy order on the T+1 asset. If you do both on the same day, the T+1 settlement (the buy) will come first, and there won't be money to cover that transaction.

You could also use T-bills, which settle T+1. SWVXX has a 7-day yield of 1.36%. There are for example 3-month T-bills around 1.65%. Even if the money market yield creeps up the next few months, it's unlikely to beat the T-bill, though of course the latter has some very mild price volatility and nonzero but very small spreads if you actually need to sell early.

In general that is not going to matter much unless you're sitting on a lot of cash for some reason, like for a large expense in the near future. For longer-term needs, some bond fund is probably better.
Thank you!
Long is the way and hard, that out of Hell leads up to light.
User avatar
Nate79
Posts: 9372
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Best options for cash in Schwab brokerage accounts?

Post by Nate79 »

SWVXX:
https://www.schwabfunds.com/public/csim ... mbol=SWVXX

For some reason it is difficult to find this page thru Schwab's website but Google finds it.
onourway
Posts: 3778
Joined: Thu Dec 08, 2016 2:39 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by onourway »

Schwab's search is truly useless. Just have to use Google to find anything on their site.

As a new Schwab customer I'm finding their sweep account option frustrating as well. I'm manually moving funds into SWVXX as others here, but it'd be much better if that could be done automatically.
stlutz
Posts: 5585
Joined: Fri Jan 02, 2009 12:08 am

Re: Best options for cash in Schwab brokerage accounts?

Post by stlutz »

The purchased money market funds trade like mutual funds but with T+1 settlement date, so there's no delay to do what you say.
Actually, they settle the same day. So, if I sell one today before market close, one can move the money elsewhere the following day.

Doesn't mean that their approach to the issue is not inferior to Fidelity or Vanguard.
arf30
Posts: 892
Joined: Sat Dec 28, 2013 10:55 am

Re: Best options for cash in Schwab brokerage accounts?

Post by arf30 »

I've been going back and forth between replacing my traditional checking account with either a Schwab brokerage account or a Fidelity brokerage account, and noticed that the main difference is Fidelity still uses SPAXX (Gov Money Market fund, 1.25% yield) as the core position. Schwab does not, as people have noted - you have to manually buy and sell SWVXX, and leave enough in the "cash" position (.15%) to cover bills and transfers.
togb
Posts: 319
Joined: Mon Oct 23, 2017 8:36 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by togb »

thanks for raising this. I've had more cash than usual sort of sitting there, in case of a major correction that looked like a buying opportunity. This thread brought some focus for me-- I can do better with that cash. I did put some cash in Vanguards short term corporate bond EFT, as a money market substitute. It yields a whopping 2% but it seems like a safe place to park some money, low volatility, easy to liquidate if I need to and at least 2% is "something".
an_asker
Posts: 4903
Joined: Thu Jun 27, 2013 2:15 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by an_asker »

Following the thread :-)
Topic Author
MnD
Posts: 5194
Joined: Mon Jan 14, 2008 11:41 am

Re: Best options for cash in Schwab brokerage accounts?

Post by MnD »

Schwab Municipal Money Fund SWTXX is 1.44%.
In my tax bracket that's the best MM option at Schwab I can find.
https://www.schwab.com/public/schwab/in ... oney_funds
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
midagelawyer
Posts: 74
Joined: Sun Jan 29, 2017 10:37 am

Re: Best options for cash in Schwab brokerage accounts?

Post by midagelawyer »

I'm having trouble understanding how the Schwab New York Municipal Money Fund had a 7-day yield of over 1% as of 3/31/2018 (today it is 1.3%) and has never, not once, ever, returned an actual annual yield above 0.56% since 2009 and is still valued at $1 per share. For all of 2011-2015, it looks like it returned 2 bps per year. Have NY muni rates risen that much since those days? Just want to make sure I'm not missing something big here because, as we all know, yield is great, but total return is what I'm after.

Thanks,
User avatar
Nate79
Posts: 9372
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Best options for cash in Schwab brokerage accounts?

Post by Nate79 »

midagelawyer wrote: Tue May 08, 2018 12:19 pm I'm having trouble understanding how the Schwab New York Municipal Money Fund had a 7-day yield of over 1% as of 3/31/2018 (today it is 1.3%) and has never, not once, ever, returned an actual annual yield above 0.56% since 2009 and is still valued at $1 per share. For all of 2011-2015, it looks like it returned 2 bps per year. Have NY muni rates risen that much since those days? Just want to make sure I'm not missing something big here because, as we all know, yield is great, but total return is what I'm after.

Thanks,
If you click on the below link and then click on the pdf file for the NY muni fund that you are talking about it will give you the annual returns going back the last 10 years:
https://www.schwab.com/public/schwab/in ... oney_funds

In deed from about 2010 until about 2015 the returns were about zero each year. This is true for this fund as well as other money market funds such as Vanguard's Prime Money Market fund:
https://personal.vanguard.com/us/funds/ ... true#tab=0

Rates really started to increase in 2016 and 2017 to get us where we are today.
midagelawyer
Posts: 74
Joined: Sun Jan 29, 2017 10:37 am

Re: Best options for cash in Schwab brokerage accounts?

Post by midagelawyer »

Thanks. Just for completeness, does this mean that the 7-day yields for those years where total return was close to zero, were also close to zero?
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Best options for cash in Schwab brokerage accounts?

Post by dbr »

midagelawyer wrote: Tue May 08, 2018 4:47 pm Thanks. Just for completeness, does this mean that the 7-day yields for those years where total return was close to zero, were also close to zero?
A money fund has fixed NAV so the yield is the return. That is the actual distribution yield is the return. Distribution yield is history. 7-day is forward looking. For short term fixed income, I am assuming the two are almost exactly the same.
User avatar
F150HD
Posts: 3926
Joined: Fri Sep 18, 2015 7:49 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by F150HD »

onourway wrote: Mon Mar 05, 2018 7:39 pm Schwab's search is truly useless. Just have to use Google to find anything on their site.

As a new Schwab customer I'm finding their sweep account option frustrating as well. I'm manually moving funds into SWVXX as others here, but it'd be much better if that could be done automatically.

Nate79 wrote: Mon Mar 05, 2018 7:02 pm SWVXX:
https://www.schwabfunds.com/public/csim ... mbol=SWVXX

For some reason it is difficult to find this page thru Schwab's website but Google finds it.

So its not just me.

I find searching their site frustrating...full of big pointless pictures (guy drinking coffee in his living room etc), circular links....7 clicks later and I think I've found what I've wanted. 1-2 page long tiny font disclaimers stating this and that....

Seems to me like its very design is to get you to 'hire' them to do it for you.

Cust Serv is great when I call....but at that, the site is so bad I am looking at moving my funds out.

Maybe I'm more used to a trading site (Fidelity etc) where you can find data you need easier and quicker? Dunno.

Took me awhile to find out that you need to actually set up a 'trade' using their trade ticket to move excess cash into a money market account.

Also...take note of the expense ratios on their money market funds.

Hate to be so negative about it, but, the site is frustrating and has been ever since I opened an account there.
Last edited by F150HD on Tue May 08, 2018 5:19 pm, edited 1 time in total.
Long is the way and hard, that out of Hell leads up to light.
User avatar
Artsdoctor
Posts: 6063
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

Re: Best options for cash in Schwab brokerage accounts?

Post by Artsdoctor »

123 wrote: Mon Mar 05, 2018 2:04 pm
F150HD wrote: Mon Mar 05, 2018 11:55 am One frustration I have with Schwab is that excess cash isn't automatically put into a 'sweep account', you have to literally put in a purchase order to move your cash into SWVXX for example (they treat it like buying a 'mutual fund'). Maybe this is a standard I've never seen? but anywhere else I have accounts, excess cash is automatically put into a sweep account to earn interest etc. you don't have to manually put in a "Buy" order as you would purchasing a stock or fund.

Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.

Maybe someone more in the know then I can comment on this? Thanks.
+1 I share you grief over such a simple thing as a default "sweep account". As much as I like Schwab and have used them for over 30 years the way they have mangled the handling of account cash balances over the last 5 (?) years is shameful. Used to be you had a default MMF and all was good. Then I think they wanted to bump-up deposits at Schwab Bank so they swept cash balances there and paid account owners a much lower interest rate. If you want to perserver you can purchase MMF shares. It does nothing to make investing easier, which is supposed to be what Schwab is about. Last year when we had a windfall we did not put it under the Schwab umbrella.
123,

This is not a Schwab issue. The SEC has forced all brokerage houses to do this, and the regulations have been in effect since at least 2016. During the 2008-2009 financial crisis, there was a concern about frozen money market accounts as well as "breaking the buck." Ultimately, the SEC put safeguards in place to make "cash accounts" liquid and that ultimately led to federal government securities making up the bulk of the funds. There are relatively complex rules pertaining to fees and gates, but the end result was having settlement funds fully liquid and containing "safe" government securities. Of course, this resulted in much smaller yields.

Most places, like Schwab, Fidelity, and Vanguard, will have multiple money market funds. However, they are not permitted to use these funds as settlement funds because of SEC regulations. This is why you cannot use your Schwab Advantage Account as the settlement fund--you must buy it.

No one is happy with this but it is the law of the land.
kenoryan
Posts: 267
Joined: Tue Sep 12, 2017 7:11 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by kenoryan »

Swoxx
Swsxx
Vwitx
User avatar
Nate79
Posts: 9372
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Best options for cash in Schwab brokerage accounts?

Post by Nate79 »

Artsdoctor wrote: Tue May 08, 2018 5:18 pm
123 wrote: Mon Mar 05, 2018 2:04 pm
F150HD wrote: Mon Mar 05, 2018 11:55 am One frustration I have with Schwab is that excess cash isn't automatically put into a 'sweep account', you have to literally put in a purchase order to move your cash into SWVXX for example (they treat it like buying a 'mutual fund'). Maybe this is a standard I've never seen? but anywhere else I have accounts, excess cash is automatically put into a sweep account to earn interest etc. you don't have to manually put in a "Buy" order as you would purchasing a stock or fund.

Also, once that cash is in SWVXX (for example), in order to use it to make a purchase of a stock or whatnot, you have to sell the fund (like a mutual fund) which delays things 1 day to my knowledge.

Maybe someone more in the know then I can comment on this? Thanks.
+1 I share you grief over such a simple thing as a default "sweep account". As much as I like Schwab and have used them for over 30 years the way they have mangled the handling of account cash balances over the last 5 (?) years is shameful. Used to be you had a default MMF and all was good. Then I think they wanted to bump-up deposits at Schwab Bank so they swept cash balances there and paid account owners a much lower interest rate. If you want to perserver you can purchase MMF shares. It does nothing to make investing easier, which is supposed to be what Schwab is about. Last year when we had a windfall we did not put it under the Schwab umbrella.
123,

This is not a Schwab issue. The SEC has forced all brokerage houses to do this, and the regulations have been in effect since at least 2016. During the 2008-2009 financial crisis, there was a concern about frozen money market accounts as well as "breaking the buck." Ultimately, the SEC put safeguards in place to make "cash accounts" liquid and that ultimately led to federal government securities making up the bulk of the funds. There are relatively complex rules pertaining to fees and gates, but the end result was having settlement funds fully liquid and containing "safe" government securities. Of course, this resulted in much smaller yields.

Most places, like Schwab, Fidelity, and Vanguard, will have multiple money market funds. However, they are not permitted to use these funds as settlement funds because of SEC regulations. This is why you cannot use your Schwab Advantage Account as the settlement fund--you must buy it.

No one is happy with this but it is the law of the land.
I don't think this is exactly true as Vanguard uses a money market fund for their settlement/sweep account (Vanguard Federal Money Market Fund (VMFXX)) where the yield is 1.6%. So somehow they figured it out....

Schwab insteads sweeps to FDIC insured bank account yielding 0.15% and specifically say that if you have cash that you do not need within a day or so that you should invest in their money market funds or other options.

I agree that it would be better if Schwab had better sweep account options like Vanguard but I don't find it difficult to do the sweep myself to the money market fund.
User avatar
Artsdoctor
Posts: 6063
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

Re: Best options for cash in Schwab brokerage accounts?

Post by Artsdoctor »

^ The Vanguard Federal Money Market fund was paying considerably less than its other money market funds. The current yield is a bit of a treat, although many of us would prefer a tax-exempt money market account as a settlement account. This is no longer possible.
NextMil
Posts: 575
Joined: Wed Dec 13, 2017 11:33 am

Re: Best options for cash in Schwab brokerage accounts?

Post by NextMil »

I just moved my emergency fund from ally into this, because I was tired of having it outside of Schwab. Just a personal preference in trying to simplify my financial life. After expense ratio, I am still doing better than ally, right? As the expense ratio is baked into the return, correct?
onourway
Posts: 3778
Joined: Thu Dec 08, 2016 2:39 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by onourway »

NextMil wrote: Tue May 15, 2018 8:53 am I just moved my emergency fund from ally into this, because I was tired of having it outside of Schwab. Just a personal preference in trying to simplify my financial life. After expense ratio, I am still doing better than ally, right? As the expense ratio is baked into the return, correct?
The quoted yield is after expenses.
arf30
Posts: 892
Joined: Sat Dec 28, 2013 10:55 am

Re: Best options for cash in Schwab brokerage accounts?

Post by arf30 »

Both Fidelity and Vanguard use money market funds as core/sweep positions, not sure why Schwab stopped doing it. Fidelity even gives you multiple options. It's a nice spot to land direct deposits/paychecks to earn a little interest before bills are paid out.
NextMil
Posts: 575
Joined: Wed Dec 13, 2017 11:33 am

Re: Best options for cash in Schwab brokerage accounts?

Post by NextMil »

onourway wrote: Tue May 15, 2018 8:57 am
NextMil wrote: Tue May 15, 2018 8:53 am I just moved my emergency fund from ally into this, because I was tired of having it outside of Schwab. Just a personal preference in trying to simplify my financial life. After expense ratio, I am still doing better than ally, right? As the expense ratio is baked into the return, correct?
The quoted yield is after expenses.
Thanks!
onourway
Posts: 3778
Joined: Thu Dec 08, 2016 2:39 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by onourway »

arf30 wrote: Tue May 15, 2018 9:03 am Both Fidelity and Vanguard use money market funds as core/sweep positions, not sure why Schwab stopped doing it. Fidelity even gives you multiple options. It's a nice spot to land direct deposits/paychecks to earn a little interest before bills are paid out.
This is pretty much my only quibble with Schwab. It feels totally out of place for an otherwise excellent brokerage.
User avatar
indexfundfan
Posts: 3962
Joined: Tue Feb 20, 2007 10:21 am
Contact:

Re: Best options for cash in Schwab brokerage accounts?

Post by indexfundfan »

I just wrote a feedback to Schwab asking them to consider adding money market funds as sweep vehicles, in particular pointing out that both Fidelity and Vanguard have this capability.
My signature has been deleted.
bberris
Posts: 2420
Joined: Sun Feb 20, 2011 8:44 am

Re: Best options for cash in Schwab brokerage accounts?

Post by bberris »

4-week, or 13 week tbills are my choice (at TDA, but I assume you get them at auction for free at Schwab too).
TDA recently disclosed $1 markup for buys and same markdown for sells per 1,000 bond. No transaction cost if you hold to maturity.
UpperNwGuy
Posts: 9477
Joined: Sun Oct 08, 2017 7:16 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by UpperNwGuy »

indexfundfan wrote: Wed May 16, 2018 6:08 am I just wrote a feedback to Schwab asking them to consider adding money market funds as sweep vehicles, in particular pointing out that both Fidelity and Vanguard have this capability.
Did Schwab ever respond to your feedback? Normally they try hard to remain competitive with Vanguard and Fidelity.
User avatar
indexfundfan
Posts: 3962
Joined: Tue Feb 20, 2007 10:21 am
Contact:

Re: Best options for cash in Schwab brokerage accounts?

Post by indexfundfan »

UpperNwGuy wrote: Sat Jun 09, 2018 5:56 pm
indexfundfan wrote: Wed May 16, 2018 6:08 am I just wrote a feedback to Schwab asking them to consider adding money market funds as sweep vehicles, in particular pointing out that both Fidelity and Vanguard have this capability.
Did Schwab ever respond to your feedback? Normally they try hard to remain competitive with Vanguard and Fidelity.
They responded by saying they will pass the suggestion along to management.
My signature has been deleted.
Carol88888
Posts: 711
Joined: Wed Jan 24, 2018 1:24 am

Re: Best options for cash in Schwab brokerage accounts?

Post by Carol88888 »

I just got the letter about my cash being moved to the sweep fund and my thought is why do they get to override the decision I had already made about this. It can't be for my good. This is just an example of Schwab looking for a little way to profit off the people who won't read the notice and will allow their cash to get miserable returns at a time while rates are rising. What Schwab gives with one hand, they take away with the other. Burns me up.

Also, for those who have forgotten, back in the great financial crisis Schwab often a very short bond fund that got decimated and later resulted in Schwab being hit with a class action suit for damages. They are not the investor's best friend. Trust me - you can't trust Schwab to be on your side when profits for them are at stake.

Notice that all their model portfolios carry a pretty heavy allocation to cash. Wonder who benefits when it's structured that way? I'll give you 2 guesses.
bondsr4me
Posts: 2427
Joined: Fri Oct 18, 2013 7:08 am

Re: Best options for cash in Schwab brokerage accounts?

Post by bondsr4me »

Carol88888 wrote: Mon Jul 16, 2018 1:31 pm I just got the letter about my cash being moved to the sweep fund and my thought is why do they get to override the decision I had already made about this. It can't be for my good. This is just an example of Schwab looking for a little way to profit off the people who won't read the notice and will allow their cash to get miserable returns at a time while rates are rising. What Schwab gives with one hand, they take away with the other. Burns me up.

Also, for those who have forgotten, back in the great financial crisis Schwab often a very short bond fund that got decimated and later resulted in Schwab being hit with a class action suit for damages. They are not the investor's best friend. Trust me - you can't trust Schwab to be on your side when profits for them are at stake.

Notice that all their model portfolios carry a pretty heavy allocation to cash. Wonder who benefits when it's structured that way? I'll give you 2 guesses.
I don't have any real bone to pick with Schwab, but I am moving (very soon) our joint brokerage and 2 IRA's out of Schwab over to either Fidelity or Vanguard. I don't care for Schwab's $10 minimum bond fee. Also, when placing internet bond orders, you have to buy the current offer price; at Fidelity you can put in a buy order that is below the current market price (it may or may not get filled). Also, at FIDO, it costs $1/bond with a $1 minimum (unlike Schwab's $10 min); 1 bond is $1; 2 bonds are $2 and so on.
I am not really badmouthing Schwab; I like the StreetSmartEdge platform; it's the fees and other stuff that kinda gets under my skin.
I do like their real-time chat too, but FIDO has that too.
harrison20
Posts: 2
Joined: Thu Jul 19, 2018 8:34 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by harrison20 »

Online brokers generally believe that people don't park money there for cash management purposes. So it is in Schwabs interest to make it a little harder for people to get better interest rates. That said I like Schwab, all my money is there except for a deminimus amount in TOS for their charting ability and studies. Had the same problem with my HSA account. They put all interest earned on cash balances into an investment account where they charged me $1 dollar a month for the 15 cents in interest I earned a month. HSA providers are mostly a huge ripoff with giant profit margins. Now have HSA with another provider that charges me much less to have a self directed HSA account with.... you guessed it Schwab. This is the first HSA provider I have found with a self directed option.
User avatar
LilyFleur
Posts: 3499
Joined: Fri Mar 02, 2018 9:36 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by LilyFleur »

I started putting some money into Schwab's SWVXX money market in May of this year. When I look at the "positions" tab, the gains/loss is 0% (which is disturbing, actually). I would like to be able to see online the $s gain/lost for that day, and the % gains/loss year to date for each fund. Or, if it is computed weekly instead of daily, show me those numbers!

When I look at my 401K online (it is not with Schwab), it is so much more transparent and easy to understand in the online portal. There is a screen that I look at and I can see the dollar amount that each fund is up or down for the day, and on the same screen, it shows the % gain/loss year to date for each fund. My 401k is with a Fortune 500 company, and they do a good job.

I selected Schwab for my brokerage account because of their highly ranked customer service. I did not imagine that their online portal would not be more customer-friendly.

Schwab doesn't have very much transparency on this. I find their site difficult to navigate. Customer service cannot seem to find the information. They instruct me to download a statement, which is a multi-step process. I like to manage my stuff easily through the online portal without having to download statements, save them on my computer, and then open them up.

Any thoughts or advice, Bogleheads?

Thanks!
User avatar
ResearchMed
Posts: 16795
Joined: Fri Dec 26, 2008 10:25 pm

Re: Best options for cash in Schwab brokerage accounts?

Post by ResearchMed »

LilyFleur wrote: Fri Oct 19, 2018 2:21 pm I started putting some money into Schwab's SWVXX money market in May of this year. When I look at the "positions" tab, the gains/loss is 0% (which is disturbing, actually). I would like to be able to see online the $s gain/lost for that day, and the % gains/loss year to date for each fund. Or, if it is computed weekly instead of daily, show me those numbers!

When I look at my 401K online (it is not with Schwab), it is so much more transparent and easy to understand in the online portal. There is a screen that I look at and I can see the dollar amount that each fund is up or down for the day, and on the same screen, it shows the % gain/loss year to date for each fund. My 401k is with a Fortune 500 company, and they do a good job.

I selected Schwab for my brokerage account because of their highly ranked customer service. I did not imagine that their online portal would not be more customer-friendly.

Schwab doesn't have very much transparency on this. I find their site difficult to navigate. Customer service cannot seem to find the information. They instruct me to download a statement, which is a multi-step process. I like to manage my stuff easily through the online portal without having to download statements, save them on my computer, and then open them up.

Any thoughts or advice, Bogleheads?

Thanks!
Have you tried clicking on the symbol "SWVXX" in your account? If it's like in ours, it won't show the same as for mutual funds/etc., but that window should then show the "7 day yield", which is currently showing "2.03".

And yes, to *initially* get SWVXX, it wasn't easy at all to navigate. To get *more* (in the same account), that's simple.
In general, I prefer the Schwab website to Vanguard or Fidelity, including the "research" parts.

Ah... I now see what you mean, I think, in terms of actual "gain/loss" in that fund.
In a way, it's like with the reinvested dividends/gains in any fund, where those are counted as "investments", so they up the cost basis. That's important in a taxable account, but annoying for "keeping track" of progress, especially for SWVXX, because there is no "appreciation", just the yield.
If I find a way to see the "change", I'll post again.

RM
This signature is a placebo. You are in the control group.
Post Reply