NJ Vanguard Money Market paying 3 percent

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Robert Birchell 2
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NJ Vanguard Money Market paying 3 percent

Post by Robert Birchell 2 » Thu Mar 26, 2020 9:41 am

I believe high interest rate returns go hand in hand with high risk.
Can you explain where the risk is in a money market fund paying 3 percent??

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Re: NJ Vanguard Money Market paying 3 percent

Post by BogleMelon » Thu Mar 26, 2020 12:04 pm

NJ resident here. This is weird! Not sure what really means. I wasn't able to find the holdings inside this fund, but Vanguard classifying it as lowest risk.
According to Vanguard explanation:
it is considered one of the most conservative investment options offered by Vanguard. Although the fund invests in short-term, high-quality securities, the amount of income that a shareholder may receive will be largely dependent on the current interest rate environment and the availability of eligible New Jersey municipal securities. Investors in a higher tax bracket who have a short-term savings goal and seek a competitive tax-free yield may wish to consider this option.
I suspect that this rate won't last long, probably something related to the current pandemic situation and emergencies, especially other states have similar yield?

Waiting for MM fund experts to chime in.
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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Re: NJ Vanguard Money Market paying 3 percent

Post by kiddoc » Thu Mar 26, 2020 12:36 pm

My guess: Probably because these funds are breaking the buck. Daily market value is less than $1 indicating credit risk.
"The four most dangerous words in investing are: 'this time it's different.'" - Sir John Templeton

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Re: NJ Vanguard Money Market paying 3 percent

Post by retiringwhen » Thu Mar 26, 2020 2:01 pm

See this thread already discussing: viewtopic.php?f=1&t=309493

I have two words for you: liquidity risk

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