$1 million Where to Park?

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Topic Author
TNOA
Posts: 25
Joined: Fri May 24, 2019 6:08 am

$1 million Where to Park?

Post by TNOA » Tue Jun 11, 2019 11:08 pm

I have $1 million (taxable account) that I have to park somewhere for 9 to 12 months. I want liquidity, and safety. I have the highest tax bracket Federal and State. I am very confused with all these Vanguard MM funds... VUSXX VMFXX VMRXX VMMXX etc. I would love some advice what is BOGLEHEADS suggestion here and how is one fund any different than the other (except 1-3 basis point SEC Yield Vanguard site indicates), also, are all these taxed both Federal and State, in which case, should I be looking into a ultra short term Muni bond if it exists? Thank you for all your advice in advance.

Below is an addition to my post... After valuable replies, I've decided to put my order for 100% VUSXX (exempt at State/Local tax level but not at federal level taxation as I understood it). My broker is TDAmeritrade. As soon as I've placed my order ($1 million) I've received "Rejected" message, and it says "Purchases in retail accounts are not allowed per the fund company". Suggestions made earlier I can not imagine were meant to be for Institutional, so I am wondering if anyone knows if this is a new rule for Retail investors? Regardless, I am back to square 1. Is there a very similar fund I can park as a retail investor $1 million for about a year, maybe less, that resembles VUSXX as far as the liquidity and safety of principal go?
Last edited by TNOA on Wed Jun 12, 2019 8:03 pm, edited 1 time in total.

poppa23
Posts: 130
Joined: Sat May 12, 2012 1:24 pm

Re: $1 million Where to Park?

Post by poppa23 » Tue Jun 11, 2019 11:24 pm

Wells Fargo has a cd 2.7 for 11 mos 250 k fdic ins per acct holder and beneficiary so you and wife can open one

michaeljmroger
Posts: 437
Joined: Fri Sep 21, 2018 10:54 am

Re: $1 million Where to Park?

Post by michaeljmroger » Tue Jun 11, 2019 11:38 pm

TNOA wrote:
Tue Jun 11, 2019 11:08 pm
I have $1 million (taxable account) that I have to park somewhere for 9 to 12 months. I want liquidity, and safety. I have the highest tax bracket Federal and State. I am very confused with all these Vanguard MM funds... VUSXX VMFXX VMRXX VMMXX etc. I would love some advice what is BOGLEHEADS suggestion here and how is one fund any different than the other (except 1-3 basis point SEC Yield Vanguard site indicates), also, are all these taxed both Federal and State, in which case, should I be looking into a ultra short term Muni bond if it exists? Thank you for all your advice in advance.
Assuming you can tolerate a tiny bit of volatility, I'd recommend VMLUX. It seems like interest rates won't increase in the short term, so VMLUX seems pretty safe to me right now. Your after-tax yield would be 1.52% I think.

Grt2bOutdoors
Posts: 20590
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Location: New York

Re: $1 million Where to Park?

Post by Grt2bOutdoors » Wed Jun 12, 2019 12:32 am

michaeljmroger wrote:
Tue Jun 11, 2019 11:38 pm
TNOA wrote:
Tue Jun 11, 2019 11:08 pm
I have $1 million (taxable account) that I have to park somewhere for 9 to 12 months. I want liquidity, and safety. I have the highest tax bracket Federal and State. I am very confused with all these Vanguard MM funds... VUSXX VMFXX VMRXX VMMXX etc. I would love some advice what is BOGLEHEADS suggestion here and how is one fund any different than the other (except 1-3 basis point SEC Yield Vanguard site indicates), also, are all these taxed both Federal and State, in which case, should I be looking into a ultra short term Muni bond if it exists? Thank you for all your advice in advance.
Assuming you can tolerate a tiny bit of volatility, I'd recommend VMLUX. It seems like interest rates won't increase in the short term, so VMLUX seems pretty safe to me right now. Your after-tax yield would be 1.52% I think.
Your suggestion meets the liquidity requirement, however it does not mean the “safe” threshold. Investments with a time horizon of 5 years or less belong in non-fluctuating accounts such as money market funds (Treasury only such as VUSXX) meet the highest quality requirement and whose NAV will not fluctuate below the $1.00 share price unlike other money market funds which can be subject to gates on withdrawal and NAV price declines; read the long form prospectus for all the details). VMLUX is subject to NAV fluctuation, the OP can lose nominal dollar value of investment. It’s up to the OP to determine if a 1.52% federal tax free yield with possible loss of principal is worth it versus a Treasury only fund (exempt at state/local taxation) that has current 7 day yield of 2.33%. Yield wise they both seem like a wash, safety of nominal principal - Treasury only wins hands down, you can’t get safer than a direct obligation of the US government.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Dandy
Posts: 5779
Joined: Sun Apr 25, 2010 7:42 pm

Re: $1 million Where to Park?

Post by Dandy » Wed Jun 12, 2019 6:51 am

Vanguard's Treasury Money Market is safe and liquid and may avoid any state income taxes. If you can take a small risk you can put some or more in Vanguard's Ltd Term Tax Exempt Fund which would avoid Federal Income taxes. Since the Fed is coming off raising interest rates to neutral or lowering them-- the 9 month to 1 year risk could be minimal and might be worth the moderate risk.

If it were me I'd probably split it 50/50 since I would expect any likely loss on the Ltd Term Tax Exempt fund would likely be offset by the Treasury MMKt dividends (current yield is 2.32%) and I'd reduce taxes.

Topic Author
TNOA
Posts: 25
Joined: Fri May 24, 2019 6:08 am

Re: $1 million Where to Park?

Post by TNOA » Wed Jun 12, 2019 8:33 am

Dandy wrote:
Wed Jun 12, 2019 6:51 am
Vanguard's Treasury Money Market is safe and liquid and may avoid any state income taxes. If you can take a small risk you can put some or more in Vanguard's Ltd Term Tax Exempt Fund which would avoid Federal Income taxes. Since the Fed is coming off raising interest rates to neutral or lowering them-- the 9 month to 1 year risk could be minimal and might be worth the moderate risk.

If it were me I'd probably split it 50/50 since I would expect any likely loss on the Ltd Term Tax Exempt fund would likely be offset by the Treasury MMKt dividends (current yield is 2.32%) and I'd reduce taxes.
Thank you so much. Would you mind putting the ticker symbols for those two for me please? I’m confused which is which looking at VG list.

Topic Author
TNOA
Posts: 25
Joined: Fri May 24, 2019 6:08 am

Re: $1 million Where to Park?

Post by TNOA » Wed Jun 12, 2019 8:35 am

Grt2bOutdoors wrote:
Wed Jun 12, 2019 12:32 am
michaeljmroger wrote:
Tue Jun 11, 2019 11:38 pm
TNOA wrote:
Tue Jun 11, 2019 11:08 pm
I have $1 million (taxable account) that I have to park somewhere for 9 to 12 months. I want liquidity, and safety. I have the highest tax bracket Federal and State. I am very confused with all these Vanguard MM funds... VUSXX VMFXX VMRXX VMMXX etc. I would love some advice what is BOGLEHEADS suggestion here and how is one fund any different than the other (except 1-3 basis point SEC Yield Vanguard site indicates), also, are all these taxed both Federal and State, in which case, should I be looking into a ultra short term Muni bond if it exists? Thank you for all your advice in advance.
Assuming you can tolerate a tiny bit of volatility, I'd recommend VMLUX. It seems like interest rates won't increase in the short term, so VMLUX seems pretty safe to me right now. Your after-tax yield would be 1.52% I think.
Your suggestion meets the liquidity requirement, however it does not mean the “safe” threshold. Investments with a time horizon of 5 years or less belong in non-fluctuating accounts such as money market funds (Treasury only such as VUSXX) meet the highest quality requirement and whose NAV will not fluctuate below the $1.00 share price unlike other money market funds which can be subject to gates on withdrawal and NAV price declines; read the long form prospectus for all the details). VMLUX is subject to NAV fluctuation, the OP can lose nominal dollar value of investment. It’s up to the OP to determine if a 1.52% federal tax free yield with possible loss of principal is worth it versus a Treasury only fund (exempt at state/local taxation) that has current 7 day yield of 2.33%. Yield wise they both seem like a wash, safety of nominal principal - Treasury only wins hands down, you can’t get safer than a direct obligation of the US government.
This is very helpful and appears sound advice for me to consider. Would you please jot down exact ticker symbol of the fund(s) you suggested? So I don’t make a mistake? Thanks so much

lostdog
Posts: 1743
Joined: Thu Feb 04, 2016 2:15 pm

Re: $1 million Where to Park?

Post by lostdog » Wed Jun 12, 2019 9:46 am

TNOA wrote:
Wed Jun 12, 2019 8:35 am
Grt2bOutdoors wrote:
Wed Jun 12, 2019 12:32 am
michaeljmroger wrote:
Tue Jun 11, 2019 11:38 pm
TNOA wrote:
Tue Jun 11, 2019 11:08 pm
I have $1 million (taxable account) that I have to park somewhere for 9 to 12 months. I want liquidity, and safety. I have the highest tax bracket Federal and State. I am very confused with all these Vanguard MM funds... VUSXX VMFXX VMRXX VMMXX etc. I would love some advice what is BOGLEHEADS suggestion here and how is one fund any different than the other (except 1-3 basis point SEC Yield Vanguard site indicates), also, are all these taxed both Federal and State, in which case, should I be looking into a ultra short term Muni bond if it exists? Thank you for all your advice in advance.
Assuming you can tolerate a tiny bit of volatility, I'd recommend VMLUX. It seems like interest rates won't increase in the short term, so VMLUX seems pretty safe to me right now. Your after-tax yield would be 1.52% I think.
Your suggestion meets the liquidity requirement, however it does not mean the “safe” threshold. Investments with a time horizon of 5 years or less belong in non-fluctuating accounts such as money market funds (Treasury only such as VUSXX) meet the highest quality requirement and whose NAV will not fluctuate below the $1.00 share price unlike other money market funds which can be subject to gates on withdrawal and NAV price declines; read the long form prospectus for all the details). VMLUX is subject to NAV fluctuation, the OP can lose nominal dollar value of investment. It’s up to the OP to determine if a 1.52% federal tax free yield with possible loss of principal is worth it versus a Treasury only fund (exempt at state/local taxation) that has current 7 day yield of 2.33%. Yield wise they both seem like a wash, safety of nominal principal - Treasury only wins hands down, you can’t get safer than a direct obligation of the US government.
This is very helpful and appears sound advice for me to consider. Would you please jot down exact ticker symbol of the fund(s) you suggested? So I don’t make a mistake? Thanks so much
OP, I think this is what he is talking about.

https://investor.vanguard.com/mutual-fu ... file/VUSXX

VUSXX-Vanguard Treasury Money Market

"Product summary
Vanguard Treasury Money Market Fund, which invests in U.S. Treasury securities, seeks to provide current income and preserve shareholders’ principal investment by maintaining a share price of $1. As such it is considered one of the most conservative investment options offered by Vanguard. Although the fund invests in short-term U.S. Treasury bills, the amount of income that a shareholder may receive will be largely dependent on the current interest rate environment. Investors who have a short-term savings goal and want the added security of investing in a fund whose underlying securities are backed by the full faith and credit of the U.S. government may wish to consider this option."
I don't invest looking in the rear view mirror and I know absolutely nothing about the future. I invest in Vanguard Total World Stock Index.

Dandy
Posts: 5779
Joined: Sun Apr 25, 2010 7:42 pm

Re: $1 million Where to Park?

Post by Dandy » Wed Jun 12, 2019 2:03 pm

Thank you so much. Would you mind putting the ticker symbols for those two for me please? I’m confused which is which looking at VG list.
VG Treasury Money Market Fund ($50k minimum) - symbol VUSXX **
Ltd Term Tax Exempt Fund (Admiral shares - Also 50k minimum) - symbol VMLUX

** can't normally see this fund when looking at VG listing. Have to hit the "Filter" box at the upper right corner and check the box for 50k minimum and up --then it will display after Fed money market and Prime money market.

Topic Author
TNOA
Posts: 25
Joined: Fri May 24, 2019 6:08 am

Re: $1 million Where to Park?

Post by TNOA » Wed Jun 12, 2019 7:06 pm

Dandy wrote:
Wed Jun 12, 2019 2:03 pm
Thank you so much. Would you mind putting the ticker symbols for those two for me please? I’m confused which is which looking at VG list.
VG Treasury Money Market Fund ($50k minimum) - symbol VUSXX **
Ltd Term Tax Exempt Fund (Admiral shares - Also 50k minimum) - symbol VMLUX

** can't normally see this fund when looking at VG listing. Have to hit the "Filter" box at the upper right corner and check the box for 50k minimum and up --then it will display after Fed money market and Prime money market.
Thank you. I got it.

Topic Author
TNOA
Posts: 25
Joined: Fri May 24, 2019 6:08 am

Re: $1 million Where to Park?

Post by TNOA » Wed Jun 12, 2019 7:34 pm

lostdog wrote:
Wed Jun 12, 2019 9:46 am
TNOA wrote:
Wed Jun 12, 2019 8:35 am
Grt2bOutdoors wrote:
Wed Jun 12, 2019 12:32 am
michaeljmroger wrote:
Tue Jun 11, 2019 11:38 pm
TNOA wrote:
Tue Jun 11, 2019 11:08 pm
I have $1 million (taxable account) that I have to park somewhere for 9 to 12 months. I want liquidity, and safety. I have the highest tax bracket Federal and State. I am very confused with all these Vanguard MM funds... VUSXX VMFXX VMRXX VMMXX etc. I would love some advice what is BOGLEHEADS suggestion here and how is one fund any different than the other (except 1-3 basis point SEC Yield Vanguard site indicates), also, are all these taxed both Federal and State, in which case, should I be looking into a ultra short term Muni bond if it exists? Thank you for all your advice in advance.
Assuming you can tolerate a tiny bit of volatility, I'd recommend VMLUX. It seems like interest rates won't increase in the short term, so VMLUX seems pretty safe to me right now. Your after-tax yield would be 1.52% I think.
Your suggestion meets the liquidity requirement, however it does not mean the “safe” threshold. Investments with a time horizon of 5 years or less belong in non-fluctuating accounts such as money market funds (Treasury only such as VUSXX) meet the highest quality requirement and whose NAV will not fluctuate below the $1.00 share price unlike other money market funds which can be subject to gates on withdrawal and NAV price declines; read the long form prospectus for all the details). VMLUX is subject to NAV fluctuation, the OP can lose nominal dollar value of investment. It’s up to the OP to determine if a 1.52% federal tax free yield with possible loss of principal is worth it versus a Treasury only fund (exempt at state/local taxation) that has current 7 day yield of 2.33%. Yield wise they both seem like a wash, safety of nominal principal - Treasury only wins hands down, you can’t get safer than a direct obligation of the US government.
This is very helpful and appears sound advice for me to consider. Would you please jot down exact ticker symbol of the fund(s) you suggested? So I don’t make a mistake? Thanks so much
OP, I think this is what he is talking about.

https://investor.vanguard.com/mutual-fu ... file/VUSXX

VUSXX-Vanguard Treasury Money Market

"Product summary
Vanguard Treasury Money Market Fund, which invests in U.S. Treasury securities, seeks to provide current income and preserve shareholders’ principal investment by maintaining a share price of $1. As such it is considered one of the most conservative investment options offered by Vanguard. Although the fund invests in short-term U.S. Treasury bills, the amount of income that a shareholder may receive will be largely dependent on the current interest rate environment. Investors who have a short-term savings goal and want the added security of investing in a fund whose underlying securities are backed by the full faith and credit of the U.S. government may wish to consider this option."
Thank you lostdog. I think michaeljmroger is right in that yield wise they seem to be a wash (i.e., 1.52% versus 1.47% after tax each), so there is no tax reduction that I can see in splitting it all 50/50. I will go with VUSXX. Thank you all for weighing in and contributing. Much appreciated, truly indebted to this group.

smectym
Posts: 377
Joined: Thu May 26, 2011 5:07 pm

Re: $1 million Where to Park?

Post by smectym » Thu Jun 13, 2019 2:51 am

Agree with many above: VUSXX. Checked the Treasury Direct option but currently 1 yr. bills yield less than the VUSXX rate.
Wealthfront does offer 2.5%. They state FDIC insured up to $1M. A promo, who knows how long that will stick

Topic Author
TNOA
Posts: 25
Joined: Fri May 24, 2019 6:08 am

Re: $1 million Where to Park?

Post by TNOA » Sun Jun 16, 2019 9:34 am

smectym wrote:
Thu Jun 13, 2019 2:51 am
Agree with many above: VUSXX. Checked the Treasury Direct option but currently 1 yr. bills yield less than the VUSXX rate.
Wealthfront does offer 2.5%. They state FDIC insured up to $1M. A promo, who knows how long that will stick
For some odd reason, only seeing this now. My apologies for not responding (thanking for your post) sooner. One of the reasons why I stay away from Treasury Direct etc., is the desire to keep it all in one place. When I notice I could get a few basis points higher elsewhere, I also notice I have to move money from existing brokerage account onto somewhere else (Just that portion). That somehow in my humble mind is causing complexity and unease. I know it's not a big deal for a lot of you, but I kind of like to stay in one place, unless the differential is so significant that I would be dumb not to undertake such a move.

Grt2bOutdoors
Posts: 20590
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: $1 million Where to Park?

Post by Grt2bOutdoors » Sun Jun 16, 2019 7:24 pm

TNOA wrote:
Tue Jun 11, 2019 11:08 pm
I have $1 million (taxable account) that I have to park somewhere for 9 to 12 months. I want liquidity, and safety. I have the highest tax bracket Federal and State. I am very confused with all these Vanguard MM funds... VUSXX VMFXX VMRXX VMMXX etc. I would love some advice what is BOGLEHEADS suggestion here and how is one fund any different than the other (except 1-3 basis point SEC Yield Vanguard site indicates), also, are all these taxed both Federal and State, in which case, should I be looking into a ultra short term Muni bond if it exists? Thank you for all your advice in advance.

Below is an addition to my post... After valuable replies, I've decided to put my order for 100% VUSXX (exempt at State/Local tax level but not at federal level taxation as I understood it). My broker is TDAmeritrade. As soon as I've placed my order ($1 million) I've received "Rejected" message, and it says "Purchases in retail accounts are not allowed per the fund company". Suggestions made earlier I can not imagine were meant to be for Institutional, so I am wondering if anyone knows if this is a new rule for Retail investors? Regardless, I am back to square 1. Is there a very similar fund I can park as a retail investor $1 million for about a year, maybe less, that resembles VUSXX as far as the liquidity and safety of principal go?
VMFXX - Vanguard Federal Money Market Fund.
2.31% 7 day yield 35.9% Treasury Bills 43% - U.S. Government obligations 17.5% Repurchase Agreements. So taxable portion will be higher because only T-Bills are state/local tax exempt. However, I’d consider this fund to be just slightly below that of VUSXX in terms of safety.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

PolarInvest
Posts: 12
Joined: Fri Sep 22, 2017 8:57 am

Re: $1 million Where to Park?

Post by PolarInvest » Sun Jun 16, 2019 7:41 pm

If it were me, I would just buy T-Bills on the secondary market for your desired maturity date. They are extremely liquid, and transaction costs are minimal (I use Schwab and it is about one basis point of transaction costs, or 0.01% of the investment amount. So changing your mind later costs very very little. No need to bother with funds with T-Bills unless you really want to.

Topic Author
TNOA
Posts: 25
Joined: Fri May 24, 2019 6:08 am

Re: $1 million Where to Park?

Post by TNOA » Sun Jun 16, 2019 8:51 pm

PolarInvest wrote:
Sun Jun 16, 2019 7:41 pm
If it were me, I would just buy T-Bills on the secondary market for your desired maturity date. They are extremely liquid, and transaction costs are minimal (I use Schwab and it is about one basis point of transaction costs, or 0.01% of the investment amount. So changing your mind later costs very very little. No need to bother with funds with T-Bills unless you really want to.
Thank you PolarInvest for your thoughtful reply. The issue I am having is liquidity. And if I interpret what you're saying, I can't buy a T-bill without having to wait out for a month or 8 weeks or 13 weeks (whichever I decide to buy) if I don't want to take principal risk. Since liquidity (as well as safety) are my two main objectives, unfortunately the trade off of going with a 4-week T-bill to stay liquid will provide too little yield. I hope I am not confused.

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Sandtrap
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Re: $1 million Where to Park?

Post by Sandtrap » Sun Jun 16, 2019 9:01 pm

Dandy wrote:
Wed Jun 12, 2019 2:03 pm
Thank you so much. Would you mind putting the ticker symbols for those two for me please? I’m confused which is which looking at VG list.
VG Treasury Money Market Fund ($50k minimum) - symbol VUSXX **
Ltd Term Tax Exempt Fund (Admiral shares - Also 50k minimum) - symbol VMLUX

** can't normally see this fund when looking at VG listing. Have to hit the "Filter" box at the upper right corner and check the box for 50k minimum and up --then it will display after Fed money market and Prime money market.
+1
This is what I have done in the past and still do for short term working capital in larger valuations.
Security of Principal
Liquidity

j :happy

Topic Author
TNOA
Posts: 25
Joined: Fri May 24, 2019 6:08 am

Re: $1 million Where to Park?

Post by TNOA » Sun Jun 16, 2019 9:23 pm

Sandtrap wrote:
Sun Jun 16, 2019 9:01 pm
Dandy wrote:
Wed Jun 12, 2019 2:03 pm
Thank you so much. Would you mind putting the ticker symbols for those two for me please? I’m confused which is which looking at VG list.
VG Treasury Money Market Fund ($50k minimum) - symbol VUSXX **
Ltd Term Tax Exempt Fund (Admiral shares - Also 50k minimum) - symbol VMLUX

** can't normally see this fund when looking at VG listing. Have to hit the "Filter" box at the upper right corner and check the box for 50k minimum and up --then it will display after Fed money market and Prime money market.
+1
This is what I have done in the past and still do for short term working capital in larger valuations.
Security of Principal
Liquidity

j :happy
Thank you Sandtrap. I've actually gone with VUSXX. Hopefully, I will witness your experience -:).

hudson
Posts: 1750
Joined: Fri Apr 06, 2007 9:15 am

Re: $1 million Where to Park?

Post by hudson » Mon Jun 17, 2019 7:08 am

I know that you've gone with VUSXX...Vanguard Treasury Money Market Fund. It pays around 2.3%...no state tax...just federal tax. It's Vanguard risk potential 1. You get a fair return and excellent safety.

What would I do in the same situation? I might make the same choice after looking hard at Vanguard's short and intermediate muni funds. I would also look very hard at Baird's intermediate muni BMBIX; is there a safer intermediate muni fund? BMBIX...would it be almost as safe as a treasury fund?

If you're in a high tax state, treasuries look good.

I always do the math (I'm sure that you've done this.); I'd figure what the payout was on 1M and subtract taxes for: VUSXX, four one-year brokered CDs, and say 5 Vanguard and Baird muni funds. Then I would look at the payout and safety and decide. I don't ever figure in percentages; I always want to look at dollars.

badger42
Posts: 479
Joined: Thu Apr 09, 2015 9:01 am

Re: $1 million Where to Park?

Post by badger42 » Mon Jun 17, 2019 8:07 am

I would just buy treasuries maturing when you think you need the money. Off the run is fine, no need to wait for an auction. It doesn't matter if it's 9 month bill or a 10 year note with 9 months left.

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