Wealthfront now offers 2.51% APY

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div
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Wealthfront now offers 2.51% APY

Post by div » Tue May 28, 2019 1:53 pm


primetime5
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Re: Wealthfront now offers 2.51% APY

Post by primetime5 » Tue May 28, 2019 5:29 pm

Very nice. Thanks!

Benosis
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Re: Wealthfront now offers 2.51% APY

Post by Benosis » Tue May 28, 2019 6:15 pm

Tempting..

dru808
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Re: Wealthfront now offers 2.51% APY

Post by dru808 » Tue May 28, 2019 7:31 pm

That is great đź‘Ť, thank you

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walletless
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Re: Wealthfront now offers 2.51% APY

Post by walletless » Tue May 28, 2019 7:33 pm

Finally, something to best VMMXX!

sarabayo
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Re: Wealthfront now offers 2.51% APY

Post by sarabayo » Tue May 28, 2019 8:09 pm

walletless wrote: ↑
Tue May 28, 2019 7:33 pm
Finally, something to best VMMXX!
Doesn't beat VMFXX yet, though (for me anyway) -- in the 24% federal and 9.3% CA state brackets, it has a tax equivalent yield of 2.58%. And VUSXX is better still, at 2.67% tax-equivalent yield. :)

boglenomics
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Re: Wealthfront now offers 2.51% APY

Post by boglenomics » Tue May 28, 2019 8:11 pm

The FDIC to $1M claim seems a bit strange. They are not a national bank association so I assume they then are partnering with multiple banks?

Are they opening an account on behalf of each client instead of as an institution to ensure they stay under the true $250K threshold per institution? What happens if Wealthfront were to become insolvent? Does SIPC step in to help recover those funds or FDIC?

After the Robinhood fiasco I assume they made sure to sort this all out. I also don't understand why banks would give Wealthfront a better rate than clients. Why isn't Marcus, Ally, Discover, etc... 2.51%?

sarabayo
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Re: Wealthfront now offers 2.51% APY

Post by sarabayo » Tue May 28, 2019 8:14 pm

boglenomics wrote: ↑
Tue May 28, 2019 8:11 pm
The FDIC to $1M claim seems a bit strange. They are not a national bank association so I assume they then are partnering with multiple banks?

Are they opening an account on behalf of each client instead of as an institution to ensure they stay under the true $250K threshold per institution? What happens if Wealthfront were to become insolvent? Does SIPC step in to help recover those funds or FDIC?
They automatically open bank accounts at various partner banks under the client's name, yes. Here is their FAQ about it.

Fidelity has done the same thing with their Cash Management Accounts for a while now -- Fidelity actually creates five accounts for you, for a total of $1.25M insured under FDIC.

Not sure about what happens if Wealthfront goes under.

boglenomics
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Re: Wealthfront now offers 2.51% APY

Post by boglenomics » Tue May 28, 2019 8:25 pm

Interesting, thanks for the info!

Having a non-FDIC middleman between me and my funds is just as risky as holding VMMXX or any non-FDIC money in my thinking.

Being a former Wealthfront client (leaving after the risk parity scandal & discovering BH) and knowing they have not become profitable I'll stick with my FDIC high yield and Vanguard options.

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walletless
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Re: Wealthfront now offers 2.51% APY

Post by walletless » Tue May 28, 2019 11:58 pm

sarabayo wrote: ↑
Tue May 28, 2019 8:09 pm
walletless wrote: ↑
Tue May 28, 2019 7:33 pm
Finally, something to best VMMXX!
Doesn't beat VMFXX yet, though (for me anyway) -- in the 24% federal and 9.3% CA state brackets, it has a tax equivalent yield of 2.58%. And VUSXX is better still, at 2.67% tax-equivalent yield. :)
Isn't VMMXX yields no different from interest (from a tax perspective)? What is the tax advantage of holding VMMXX here?

sarabayo
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Re: Wealthfront now offers 2.51% APY

Post by sarabayo » Wed May 29, 2019 12:19 am

walletless wrote: ↑
Tue May 28, 2019 11:58 pm
sarabayo wrote: ↑
Tue May 28, 2019 8:09 pm
walletless wrote: ↑
Tue May 28, 2019 7:33 pm
Finally, something to best VMMXX!
Doesn't beat VMFXX yet, though (for me anyway) -- in the 24% federal and 9.3% CA state brackets, it has a tax equivalent yield of 2.58%. And VUSXX is better still, at 2.67% tax-equivalent yield. :)
Isn't VMMXX yields no different from interest (from a tax perspective)? What is the tax advantage of holding VMMXX here?
What I'm saying is that on a tax-equivalent basis, Wealthfront's 2.51% APY doesn't beat VMFXX's 2.58% and VUSXX's 2.67% (those numbers are based on my tax brackets). However, it does beat VMMXX's 2.41%, as you pointed out.

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walletless
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Re: Wealthfront now offers 2.51% APY

Post by walletless » Wed May 29, 2019 12:56 am

sarabayo wrote: ↑
Wed May 29, 2019 12:19 am
walletless wrote: ↑
Tue May 28, 2019 11:58 pm
sarabayo wrote: ↑
Tue May 28, 2019 8:09 pm
walletless wrote: ↑
Tue May 28, 2019 7:33 pm
Finally, something to best VMMXX!
Doesn't beat VMFXX yet, though (for me anyway) -- in the 24% federal and 9.3% CA state brackets, it has a tax equivalent yield of 2.58%. And VUSXX is better still, at 2.67% tax-equivalent yield. :)
Isn't VMMXX yields no different from interest (from a tax perspective)? What is the tax advantage of holding VMMXX here?
What I'm saying is that on a tax-equivalent basis, Wealthfront's 2.51% APY doesn't beat VMFXX's 2.58% and VUSXX's 2.67% (those numbers are based on my tax brackets). However, it does beat VMMXX's 2.41%, as you pointed out.
I'm still lost why VMFXX has a higher tax-effective yield for you. VMFXX is taxed at both federal and state for California. Are you sure you're not thinking about VMSXX?
https://thefinancebuff.com/which-vangua ... -fund.html

isira
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Re: Wealthfront now offers 2.51% APY

Post by isira » Wed May 29, 2019 1:21 am

walletless wrote: ↑
Wed May 29, 2019 12:56 am
I'm still lost why VMFXX has a higher tax-effective yield for you. VMFXX is taxed at both federal and state for California. Are you sure you're not thinking about VMSXX?
https://thefinancebuff.com/which-vangua ... -fund.html
A portion of VMFXX is tax free in California because it meets the required threshold of having over 50% of assets invested in US government obligations.
https://personal.vanguard.com/pdf/USGO_012019.pdf

sarabayo
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Re: Wealthfront now offers 2.51% APY

Post by sarabayo » Wed May 29, 2019 2:36 am

isira wrote: ↑
Wed May 29, 2019 1:21 am
walletless wrote: ↑
Wed May 29, 2019 12:56 am
I'm still lost why VMFXX has a higher tax-effective yield for you. VMFXX is taxed at both federal and state for California. Are you sure you're not thinking about VMSXX?
https://thefinancebuff.com/which-vangua ... -fund.html
A portion of VMFXX is tax free in California because it meets the required threshold of having over 50% of assets invested in US government obligations.
https://personal.vanguard.com/pdf/USGO_012019.pdf
Yes, exactly - to be specific, its dividends are 77.79% untaxed by California, which in my tax brackets works out to a tax rate of 0.24 + 0.2221*0.093 ~= 26.07%, compared to 33.3% for VMMXX.

That 77.79% number has quite improved (increased) even just in the last few years, so I wouldn't be surprised if that TFB article (which was written in 2007) is due for an update.

esteen
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Re: Wealthfront now offers 2.51% APY

Post by esteen » Wed May 29, 2019 1:18 pm

boglenomics wrote: ↑
Tue May 28, 2019 8:25 pm
Having a non-FDIC middleman between me and my funds is just as risky as holding VMMXX or any non-FDIC money in my thinking.
This is what I'm worried about. I'm in the process of moving a good chunk of my emergency fund from a (virtually) non interest bearing account to a high-yield savings account. Wealthfront is technically the highest, but CitiBank (2.36%) and Ally (2.20%), among others, are almost as high and aren't middlemen.

Does anyone have a good idea on the availability of the money of Wealthfront were to go under? Is there a "gold standard" high yield savings account that BH forum-goers typically recommend?

Thanks!

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walletless
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Re: Wealthfront now offers 2.51% APY

Post by walletless » Wed May 29, 2019 1:26 pm

The only accounts I have at Fidelity are retirement accounts (401K, IRA). The investment and cash Management accounts only have couple thousand dollars in core/sweep, no other investments (they're all in VG which will close my cm equivalent account). Hopefully that shouldn't impact from lack of fdic insurance beyond the few thousand I have.

boglenomics
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Re: Wealthfront now offers 2.51% APY

Post by boglenomics » Wed May 29, 2019 7:22 pm

In the non-FDIC world of money there's also a big difference between the players as well.

Wealthfront has a $11.4 billion AUM and has not made a profit or been able to run at cost vs. the multi-trillion AUM of Schwab, Vanguard, and Fidelity who are also covering the cost of business operations successfully. I would trust the "big three" much more.

Having such a small firm that is non-FDIC and burning cash stand between you and your FDIC money just seems like a risk that is hard to assess and potentially high.

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walletless
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Re: Wealthfront now offers 2.51% APY

Post by walletless » Wed May 29, 2019 7:35 pm

isira wrote: ↑
Wed May 29, 2019 1:21 am
walletless wrote: ↑
Wed May 29, 2019 12:56 am
I'm still lost why VMFXX has a higher tax-effective yield for you. VMFXX is taxed at both federal and state for California. Are you sure you're not thinking about VMSXX?
https://thefinancebuff.com/which-vangua ... -fund.html
A portion of VMFXX is tax free in California because it meets the required threshold of having over 50% of assets invested in US government obligations.
https://personal.vanguard.com/pdf/USGO_012019.pdf
Ah, got it. Thanks for the explanation!

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travelogue
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Re: Wealthfront now offers 2.51% APY

Post by travelogue » Tue Jun 11, 2019 5:12 pm

I moved some funds in to try it out as I had a Capital One money market account that dropped below the $10k threshold for 2% APR. Nice that there are unlimited withdrawals (vs 6 per month for savings and money market deposit accounts). One bummer is they don’t have account numbers to accept direct deposit yet, so automatic savings requires a two-step shuffle. I also find the Wealthfront interface overkill for cash management, but it was interesting to see the platform’s analysis of my assets and goals.

I may end up just moving the cash in this savings bucket to a Vanguard money market fund (which is where I currently park my e-fund).

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travelogue
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Re: Wealthfront now offers 2.51% APY

Post by travelogue » Tue Jun 11, 2019 5:18 pm

esteen wrote: ↑
Wed May 29, 2019 1:18 pm
Is there a "gold standard" high yield savings account that BH forum-goers typically recommend?
A lot of folks recommend Ally. I have accounts there and it’s fine. (I’ve used Capital One 360 as well, but rates are lagging.)

Lots of support for using Vanguard’s money market accounts instead of a bank. VMFXX (my choice due to sweep status and tax benefits) or VMMXX. VUSXX if you meet the minimum investment.

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