How to invest cash at Schwab?

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EHEngineer
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Joined: Sat Feb 28, 2015 3:35 pm

Re: How to invest cash at Schwab?

Post by EHEngineer »

tj wrote: Tue Feb 06, 2024 11:45 am
EHEngineer wrote: Mon Feb 05, 2024 7:13 pm
CFmartin wrote: Mon Feb 05, 2024 7:02 pm To add clarity to my situation-
I felt I was getting too much in of my AA into stocks and with the bond market doing poorly and a mini wind fall of money that came my way

I was tryig to find a place to park cash, my bank pays almost nothing, so with Vanguard I just started parking this cash in the settlement fund

which was getting around 5%, which seemed to be better than bonds.

So after selling some under performers at Schwab, this dumped a sizable amount in my cash holding.

I had assumed this account would mirror what VG does,

I got a lot of good info so far and I am very thankful. I am always open to suggestions on were to park money that will have lower risk, with some return.
emphasis added.

Schwab earns a substantial portion of their revenue from people making that assumption. There are recent news that schwab investors are moving more money out of the settlement account. Schwab's revenue is down enough to be news-worthy.
It didn't matter as much when interest rates were near zero. People are paying more attention when you can get 5% on a money market.
Exactly. I've wondered why schwab is being so "stingy" with their bank account rate. Why do they need a 4.5% differential? Maybe if they offered 3.5% or 4% people wouldn't bother with the money market funds and schwab could make 1-1.5%. That's more than they were making 2 years ago.
Or, you can ... decline to let me, a stranger on the Internet, egg you on to an exercise in time-wasting, and you could say "I'm probably OK and I don't care about it that much." -Nisiprius
tj
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Joined: Wed Dec 23, 2009 11:10 pm

Re: How to invest cash at Schwab?

Post by tj »

EHEngineer wrote: Sat Feb 10, 2024 1:58 pm
tj wrote: Tue Feb 06, 2024 11:45 am
EHEngineer wrote: Mon Feb 05, 2024 7:13 pm
CFmartin wrote: Mon Feb 05, 2024 7:02 pm To add clarity to my situation-
I felt I was getting too much in of my AA into stocks and with the bond market doing poorly and a mini wind fall of money that came my way

I was tryig to find a place to park cash, my bank pays almost nothing, so with Vanguard I just started parking this cash in the settlement fund

which was getting around 5%, which seemed to be better than bonds.

So after selling some under performers at Schwab, this dumped a sizable amount in my cash holding.

I had assumed this account would mirror what VG does,

I got a lot of good info so far and I am very thankful. I am always open to suggestions on were to park money that will have lower risk, with some return.
emphasis added.

Schwab earns a substantial portion of their revenue from people making that assumption. There are recent news that schwab investors are moving more money out of the settlement account. Schwab's revenue is down enough to be news-worthy.
It didn't matter as much when interest rates were near zero. People are paying more attention when you can get 5% on a money market.
Exactly. I've wondered why schwab is being so "stingy" with their bank account rate. Why do they need a 4.5% differential? Maybe if they offered 3.5% or 4% people wouldn't bother with the money market funds and schwab could make 1-1.5%. That's more than they were making 2 years ago.

Yup. They even have big splash banners on their homepage showing that you can earn 5%. But they don't let you have a money market settlement fund.
drzzzzz
Posts: 1047
Joined: Sat Sep 22, 2012 9:56 pm

Re: How to invest cash at Schwab?

Post by drzzzzz »

My biggest irritation at Schwab if that they don' have a money market fund that pays more like at Vanguard and Fidelity. Really like that Fidelity will auto-liquidate from any money market fund as needed.
tj
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Re: How to invest cash at Schwab?

Post by tj »

drzzzzz wrote: Sat Feb 10, 2024 7:21 pm My biggest irritation at Schwab if that they don' have a money market fund that pays more like at Vanguard and Fidelity. Really like that Fidelity will auto-liquidate from any money market fund as needed.
Schwab does have high paying money market funds, just can't use them as a sweep fund.
SantaClaraSurfer
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Re: How to invest cash at Schwab?

Post by SantaClaraSurfer »

1. We invest retirement savings once a month at Schwab with crisp, freshly-transferred cash from our credit union checking account (we seem to be able to invest cash transfers into most investments at Schwab same day)

2. Everything else that we want to keep as "near cash" at Schwab is in

a) a CA Muni Money Fund (SWKXX), the current 7-day Yield of 2.75% for SWKXX gets me to about 5%+ tax equivalent,
b) or rolling T-Bills (Schwab's T-Bill ladder builder is easy and intuitive, never had an issue, and our most recent rung was avg. of 5.13% YTM).

3. We keep a small amount of what's basically EF cash in Schwab Checking. It's a small enough total we don't care too much about the low interest paid, but a large enough sum we could make a trade or two if we really felt we needed/wanted to, or use the Schwab 'free anywhere' ATM card.

Vanguard's settlement account IS better, I think, but due to the nature of our Vanguard holdings, we basically never leave anything in settlement funds for any length of time at Vanguard. (Though when we do, I notice the better interest rate!)

The last cash layer at Schwab does comes in handy for mid-month investing when dividend income, or some small investment transaction pops up like the cash back rewards from the Schwab AMEX ("not the best, but also not bad") 1.5% Investor cash back card, and I'd like make a larger purchase than the funds available will allow. I can always sell a Money Fund and repay my cash account the next day.

One upside of the downside at Schwab is that cash in Schwab checking is basically like having an extra bank/no Fee VISA ATM debit card in your financial arsenal; that is worth something in my experience when traveling, navigating places that surprise you and don't take AMEX, or just being the family banker to college age children, and having another way to meet a surprise expense.
drzzzzz
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Re: How to invest cash at Schwab?

Post by drzzzzz »

tj wrote: Sat Feb 10, 2024 7:41 pm
drzzzzz wrote: Sat Feb 10, 2024 7:21 pm My biggest irritation at Schwab if that they don' have a money market fund that pays more like at Vanguard and Fidelity. Really like that Fidelity will auto-liquidate from any money market fund as needed.
Schwab does have high paying money market funds, just can't use them as a sweep fund.
Thanks I do use the higher paying money market fund, but if I write a check I need to have the funds in cash to cover and I have to look at the account regularly to haveany posted dividends transferred by me to the money market fund - be great if it was more automatic.
Target2019
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Joined: Sat Mar 03, 2007 4:30 pm

Re: How to invest cash at Schwab?

Post by Target2019 »

FromAto401k wrote: Tue Feb 06, 2024 10:08 am This thread illustrates—to me at least—the single most significant advantage of Fidelity over Schwab: the ability to keep cash in a MMF and have it auto-liquidate as needed. Ultimately, I have decided I value Schwab’s customer service enough to overlook that fact and for the most part have consolidated at Schwab. I am, however, constantly considered moving our banking from Ally to Fidelity to take advantage of the auto-liquidated feature.

As for Schwab MMFs, as mentioned upthread, if you can swing the $1m to get into SNAXX, you can then keep as little as $1 in it and have access to their highest yielding fund.

Meanwhile, for moving cash out of Schwab, I have found it is always faster to do an instant transfer from brokerage account to associated checking account, and then transferring out of Schwab from the checking account. Usually happens same day if placed in the morning.
Yes, the sweep cash "thing" needs to be worked around. The way we do this is by linking local bank checking (our bill-pay account) with DiscoverBank HYSA, and Schwab brokerage. All transfers are possible.

We also hold Vanguard Roth's and SEP-IRA. It is conceivable that we eventually move those to Fidelity to get access to their cash management.
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ed97643
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Location: Columbus Ohio area

Re: How to invest cash at Schwab?

Post by ed97643 »

FWIW, I use SNSXX at Schwab. As noted, you need to manually push funds from SNSXX to cash in order to trade with those funds. I do so usually the day before my intended trade date. Then the day AFTER the trade, I push any excess leftover money from the cash account back to SNSXX until I plan another trade.

I will add that I keep very little idle money in the SNSXX. Peanuts, really. I want the bulk of my schwab money in ETFs such as VOO, BKLC, etc.
AA 77/23; on the glide path towards 60/40 at retirement.
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jeffyscott
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Re: How to invest cash at Schwab?

Post by jeffyscott »

^ As has been stated many times you can trade based on cash in SNSXX. You just have to then manually sell the SNSXX the day before the settlement date of your buy to cover the trade.

Next time you are going to trade, just put in your buy order without selling any SNSXX. Then look at the order messages and you will see a warning telling you that you need sell shares of your purchased MMF. You can even verify this now, by putting a trade to buy a mutual fund and then canceling at the confirmation screen after you read the messages.
SantaClaraSurfer
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Re: How to invest cash at Schwab?

Post by SantaClaraSurfer »

jeffyscott wrote: Sun Feb 11, 2024 9:33 am ^ As has been stated many times you can trade based on cash in SNSXX. You just have to then manually sell the SNSXX the day before the settlement date of your buy to cover the trade.

Next time you are going to trade, just put in your buy order without selling any SNSXX. Then look at the order messages and you will see a warning telling you that you need sell shares of your purchased MMF. You can even verify this now, by putting a trade to buy a mutual fund and then canceling at the confirmation screen after you read the messages.
Verified this with a full round trip in a non option enabled margin account that holds both ETFs and a Money Fund (SWKXX) this week.

1. Day 1: Purchased ETF shares with cash balance of zero. They settle in 2 days
2. Day 1: My cash balance went negative red for the amount of the purchase
3. Day 1: After purchasing my shares I then sold the exact amount from a Schwab Money Fund held in the same account. These settle in 1 day.
4. Day 1 End of Day Market Close: My CASH in the Schwab account still shows Negative Red for the amount of the purchase
5. Day 2: Money Fund settles / CASH in the Schwab account is now at zero balance/black.
6. Day 3: Equity Shares settle

On Day 1 prior to EOD I chatted with a Schwab Trade desk rep to confirm that my sale of the the Money Fund would cover the ETF purchase and they confirmed that I had done this correctly and so long as the Money Fund settled on the same day, or prior, as in my case, I was all good. I also confirmed that I would not have an issue with running afoul of Schwab policies running this transaction sequence, even in a non-option margin account.

Takeaway: you can make trades in Schwab accounts in which you hold Money Funds in the same account with zero available cash, so long as you then sell an amount of the Money Fund to match the amount you went negative on your cash balance by the settlement date. (If you have more than one Schwab account, make sure your money fund, with a sufficient balance, is in the same account as your trade.)

So, in this case, a Money Fund held in the same account can serve the function of a settlement fund (without actually being a settlement fund) so long as you meet the safe harbor above.

Probably the biggest downside is that the obligation to track and properly execute this is entirely on your shoulders, even if you have complicated sequences of trades, for example, with buying and selling on multiple days.
Last edited by SantaClaraSurfer on Thu Feb 15, 2024 1:55 pm, edited 1 time in total.
urban
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Re: How to invest cash at Schwab?

Post by urban »

SantaClaraSurfer wrote: Thu Feb 15, 2024 10:33 am
jeffyscott wrote: Sun Feb 11, 2024 9:33 am ^ As has been stated many times you can trade based on cash in SNSXX. You just have to then manually sell the SNSXX the day before the settlement date of your buy to cover the trade.

Next time you are going to trade, just put in your buy order without selling any SNSXX. Then look at the order messages and you will see a warning telling you that you need sell shares of your purchased MMF. You can even verify this now, by putting a trade to buy a mutual fund and then canceling at the confirmation screen after you read the messages.
Verified this with a full round trip in a non option enabled account that holds both ETFs and a Money Fund (SWKXX) this week.

1. Day 1: Purchased ETF shares with cash balance of zero. They settle in 2 days
2. Day 1: My cash balance went negative red for the amount of the purchase
3. Day 1: After purchasing my shares I then sold the exact amount from a Schwab Money Fund held in the same account. These settle in 1 day.
4. Day 1 End of Day Market Close: My CASH in the Schwab account still shows Negative Red for the amount of the purchase
5. Day 2: Money Fund settles / CASH in the Schwab account is now at zero balance/black.
6. Day 3: Equity Shares settle

On Day 1 prior to EOD I chatted with a Schwab Trade desk rep to confirm that my sale of the the Money Fund would cover the ETF purchase and they confirmed that I had done this correctly and so long as the Money Fund settled on the same day, or prior, as in my case, I was all good. I also confirmed that I would not have an issue with running afoul of Schwab policies running this transaction sequence, even in a non-option account.

Takeaway: you can make trades in Schwab accounts in which you hold Money Funds in the same account with zero available cash, so long as you then sell an amount of the Money Fund to match the amount you went negative on your cash balance by the settlement date. (If you have more than one Schwab account, make sure your money fund, with a sufficient balance, is in the same account as your trade.)

So, in this case, a Money Fund held in the same account can serve the function of a settlement fund (without actually being a settlement fund) so long as you meet the safe harbor above.

Probably the biggest downside is that the obligation to track and properly execute this is entirely on your shoulders, even if you have complicated sequences of trades, for example, with buying and selling on multiple days.
Thank you Serfer (and jeffyscott), it is very helpfull. I assume a non-option account you mean a non-margin account.
SantaClaraSurfer
Posts: 716
Joined: Tue Feb 19, 2019 10:09 am

Re: How to invest cash at Schwab?

Post by SantaClaraSurfer »

urban wrote: Thu Feb 15, 2024 11:14 am
SantaClaraSurfer wrote: Thu Feb 15, 2024 10:33 am
jeffyscott wrote: Sun Feb 11, 2024 9:33 am ^ As has been stated many times you can trade based on cash in SNSXX. You just have to then manually sell the SNSXX the day before the settlement date of your buy to cover the trade.

Next time you are going to trade, just put in your buy order without selling any SNSXX. Then look at the order messages and you will see a warning telling you that you need sell shares of your purchased MMF. You can even verify this now, by putting a trade to buy a mutual fund and then canceling at the confirmation screen after you read the messages.
Verified this with a full round trip in a non option enabled account that holds both ETFs and a Money Fund (SWKXX) this week.

1. Day 1: Purchased ETF shares with cash balance of zero. They settle in 2 days
2. Day 1: My cash balance went negative red for the amount of the purchase
3. Day 1: After purchasing my shares I then sold the exact amount from a Schwab Money Fund held in the same account. These settle in 1 day.
4. Day 1 End of Day Market Close: My CASH in the Schwab account still shows Negative Red for the amount of the purchase
5. Day 2: Money Fund settles / CASH in the Schwab account is now at zero balance/black.
6. Day 3: Equity Shares settle

On Day 1 prior to EOD I chatted with a Schwab Trade desk rep to confirm that my sale of the the Money Fund would cover the ETF purchase and they confirmed that I had done this correctly and so long as the Money Fund settled on the same day, or prior, as in my case, I was all good. I also confirmed that I would not have an issue with running afoul of Schwab policies running this transaction sequence, even in a non-option account.

Takeaway: you can make trades in Schwab accounts in which you hold Money Funds in the same account with zero available cash, so long as you then sell an amount of the Money Fund to match the amount you went negative on your cash balance by the settlement date. (If you have more than one Schwab account, make sure your money fund, with a sufficient balance, is in the same account as your trade.)

So, in this case, a Money Fund held in the same account can serve the function of a settlement fund (without actually being a settlement fund) so long as you meet the safe harbor above.

Probably the biggest downside is that the obligation to track and properly execute this is entirely on your shoulders, even if you have complicated sequences of trades, for example, with buying and selling on multiple days.
Thank you Serfer (and jeffyscott), it is very helpfull. I assume a non-option account you mean a non-margin account.
Yes, exactly. Fixed it. Terminology hiccup!
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