Help with difference between Tbills, SGOV, USFR, VMFXX

[spartan777]

Hello all,

Ive been tasked with helping my parents park a large chunk of cash and its stressing me out what i should do. My parents are old, 80yrs+, they do not understand or have ever invested the stock market and not really interested in learning.

They have $4mil cash that they dont really need touch. I suggested tbills as i could explain that to my dad as being like a government CD and without state taxes. But my question is if they dont really need to touch it (but want the option too "just in case') would i be better just dumping it all in SGOV or USFR? Or just letting it sit in the vanguard settlement account (VMFXX) ? I see the rates varies just slightly between VMFXX/SGOV/USFR... what is most secure in protecting their money? Or should i just do a bit of a Tbill ladder? What are the risks of losing money if i were to buy SGOV or USFR...or even just leaving it in VMFXX. And those are not taxed on state level right? Is it wrong to think of SGOV for example, as like a HYSA ? Buy it, park the money...earn interest.... but can sell whenever money needs to be pulled out? Thats how im thinking of it. Like depositing it into a HYSA, earn interest (but less) and pull out cash whenever. However thats FDIC for only $500k for their joint account. Where as SGOV is not fdic....

This 4mil is coming to me and my sisters in the end, but its unfortunate i cant throw it in VTSAX or VTWAX and have it really grow for us. But what funds could you recommend that preserves the cash low risk for elderly couple like my parents. That arent interested in it losing 20% and needed years to gain back.... wellington/wellesley ? or a dividend fund? But thats maybe too risky? Just looking for options to explain to my parents.

[Retired 2017]

More information might be helpful. Such as what's the rest of your parent's money and what is being done with it. And what is the financial status of you and your sibs. You say your parents have the money as an emergency source.Maybe they already have an emergency amount. It might make sense to determine just how much should be an emergency source and remove from the 4mil. Now we have the investable amount for the children. How would you and your sibs invest your money? invest the remainder after a reasonable emergency amount is subtracted as if you were investing it for the children.

[Retired 2017]

More information might be helpful. Such as what's the rest of your parent's money and what is being done with it. And what is the financial status of you and your sibs. You say your parents have the money as an emergency source.Maybe they already have an emergency amount. It might make sense to determine just how much should be an emergency source and remove from the 4mil. Now we have the investable amount for the children. How would you and your sibs invest your money? invest the remainder after a reasonable emergency amount is subtracted as if you were investing it for the children.

[02nz]

Where as SGOV is not fdic....

It's not FDIC-insured because it holds liabilities of the federal government. Federal insurance would be redundant.

SGOV is a good substitute for cash. It yields around 5.3% and dividends are largely exempt from state income tax. Its holdings have very short durations, so interest-rate risk is negligible. Whether your parents should be holding $4M in cash or anything equivalent is a different question.

[petulant]

Hello all,

Ive been tasked with helping my parents park a large chunk of cash and its stressing me out what i should do. My parents are old, 80yrs+, they do not understand or have ever invested the stock market and not really interested in learning.

They have $4mil cash that they dont really need touch. I suggested tbills as i could explain that to my dad as being like a government CD and without state taxes. But my question is if they dont really need to touch it (but want the option too "just in case') would i be better just dumping it all in SGOV or USFR? Or just letting it sit in the vanguard settlement account (VMFXX) ? I see the rates varies just slightly between VMFXX/SGOV/USFR... what is most secure in protecting their money? Or should i just do a bit of a Tbill ladder? What are the risks of losing money if i were to buy SGOV or USFR...or even just leaving it in VMFXX. And those are not taxed on state level right? Is it wrong to think of SGOV for example, as like a HYSA ? Buy it, park the money...earn interest.... but can sell whenever money needs to be pulled out? Thats how im thinking of it. Like depositing it into a HYSA, earn interest (but less) and pull out cash whenever. However thats FDIC for only $500k for their joint account. Where as SGOV is not fdic....

This 4mil is coming to me and my sisters in the end, but its unfortunate i cant throw it in VTSAX or VTWAX and have it really grow for us. But what funds could you recommend that preserves the cash low risk for elderly couple like my parents. That arent interested in it losing 20% and needed years to gain back.... wellington/wellesley ? or a dividend fund? But thats maybe too risky? Just looking for options to explain to my parents.

Note that the Vanguard settlement fund may hold large positions in the Fed's reverse repo facilities and other items that are not technically eligible for the state income tax exclusion for Treasury interest. The Vanguard money market that only holds Treasury securities has the ticker VUSXX.

The assets you list should all be roughly equivalent, but I would suggest VUSXX. It is the least work for holding rolling Treasury bills, for very low expenses, and will be the most liquid out of all the options. Theoretically, they should do slightly better with direct Treasury bills (no expense ratio), but then it becomes another question having to liquidate some if they need money and generally manage the ongoing ladder. If you've got credibility on the line and also don't want to have a second job I think VUSXX threads the needle on "always available" but still getting 99.90% of the returns of Treasury bills.

SGOV will perform similarly but you technically have small principal volatility (previously from the Fed raising rates, but mainly from the drop in share price from paying distributions). From the perspective of "selling" this position to your parents and ensuring their comfort level, I would stay away from anything that could theoretically have a down day. That's why I suggest VUSXX. USFR has small volatility like SGOV so I also wouldn't use that.

Note that at some point you probably should brooch the topic of them holding something more than Treasury bills. I imagine it would be relationally smoother to set up the cash-alternative option at issue and then in a couple months mention that short-term rates might go down some day so it could better to park some of that in something more appropriate for their objectives.

[beyou]

SGOV, safe, higher yield and simple to manage.

It holds slightly longer term tbills and can get that higher yield, as a result. Price not fixed like mmkt fund but pretty stable.

[jvini]

SGOV. High yield, no real interest rate risk. Goes up when Fed raises. It's like having a great money market and bond allocation rolled into one. Weird times with the yield curve and SGOV let's you take advantage.

[cas]

Given that your parents are 80+ years old and that a $4 million portfolio may mean that an estate attorney will recommend that it would be worthwhile for the survivor to file for portability of the unused portion of the estate tax exemption of the first spouse to die, you may interested in this recent thread:

How to calculate "Step Up" basis upon death for Treasury Bill ?

That thread is just non-lawyers/non-accountants trying to figure out how to value and do tax-reporting when the owner of a T-bill dies before the T-bill matures. And, for a $4+million-ish estate, you would have an estate lawyer/accountant involved to provide answers. But if you want to be able to proofread the work of the professionals (and brokerage(s)) ... the regulations involving mutual funds/ETFs appear to be much more clear than the regulations involving T-bills.

Or maybe those of us non-professionals who tried to figure it out in the above thread are just making a mountain out of a molehill. But you might want to read and decide for yourself how much you want to have to deal with this sort of thing during a difficult time when there are a gazillion other things to deal with.