Is it a waste keeping money in a money market account?

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Jesteroftheswamp
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Is it a waste keeping money in a money market account?

Post by Jesteroftheswamp » Fri Nov 02, 2018 2:27 pm

I have about $60K in a money market account, with $15-20K of that being allotted for emergency fund and the rest for a down payment. I hate leaving this much in a money market account however I may need it within the next few years. Is this a suitable place to store this much money given my goals of buying property in the next few years?

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PrettyCoolWorkshop
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Re: Is it a waste keeping money in a money market maccount?

Post by PrettyCoolWorkshop » Fri Nov 02, 2018 2:37 pm

In my experience, money market account yields have not done any better than bank account yields since I've been an adult (about a decade). Currently, FZFXX offers a yield of 1.83% while ally penalty free CD's are offering 2.1%. I am also not 100% sure whether the FZFXX yield includes its expense ratio of .42%, but it is worse regardless. (click on monthly fact sheet for best info on FZFXX here: https://fundresearch.fidelity.com/mutua ... /316341304)

SPAXX is similarly disappointing at 1.82%. If you want to keep this cash fairly liquid, but earn a little bit better money, get an Ally penalty-free CD.

Generally, I often find the prospectuses for money market accounts confusing and obfuscating. They should just try to do their best to state their current real yield and the distribution of investments they are composed of (by maturity). Instead, they report their NAV to be $1 (why?) and state that they are invested in "treasury bills" or "US government repurchase agreements" of unknown yield and no relation to information that can be looked up.
Last edited by PrettyCoolWorkshop on Fri Nov 02, 2018 2:39 pm, edited 1 time in total.
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KlingKlang
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Re: Is it a waste keeping money in a money market maccount?

Post by KlingKlang » Fri Nov 02, 2018 2:39 pm

Money that you need in less than ten years should not be in the stock market. Short term bonds are currently yielding little more than cash and their market value may decline. CDs and iBonds are an option to earn a little more but you give up liquidity. For funds that have to be liquid and that you do not know the exact time that they will be required money market/savings accounts are about your only choice. Do shop around and make sure that you are getting the best rate available.

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Re: Is it a waste keeping money in a money market maccount?

Post by arf30 » Fri Nov 02, 2018 2:58 pm

Vanguard has really good MM funds, or you can use high yield savings or CDs at an online bank.

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Re: Is it a waste keeping money in a money market maccount?

Post by hawkfan55 » Fri Nov 02, 2018 3:08 pm

I may need it within the next few years. Is this a suitable place to store this much money given my goals of buying property in the next few years?
Yes. A good money market fund like Vanguard Prime Money Market should fit the bill giving you maximum flexibility. :happy
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Re: Is it a waste keeping money in a money market maccount?

Post by sport » Fri Nov 02, 2018 3:13 pm

There are Money Market Accounts at banks, and Money Market Funds at investment companies. Yields can vary considerably. Vanguard Prime Money Market Fund presently yields 2.21%. That yield is certainly not a "waste".

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Re: Is it a waste keeping money in a money market maccount?

Post by KlangFool » Fri Nov 02, 2018 3:15 pm

Jesteroftheswamp wrote:
Fri Nov 02, 2018 2:27 pm
I have about $60K in a money market account, with $15-20K of that being allotted for emergency fund and the rest for a down payment. I hate leaving this much in a money market account however I may need it within the next few years. Is this a suitable place to store this much money given my goals of buying property in the next few years?
Jesteroftheswamp,

Why do you need to save 40K for a down payment? What is your annual savings?

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Re: Is it a waste keeping money in a money market maccount?

Post by grabiner » Fri Nov 02, 2018 10:09 pm

Jesteroftheswamp wrote:
Fri Nov 02, 2018 2:27 pm
I have about $60K in a money market account, with $15-20K of that being allotted for emergency fund and the rest for a down payment. I hate leaving this much in a money market account however I may need it within the next few years. Is this a suitable place to store this much money given my goals of buying property in the next few years?
You could do a little better in a short-term fund, such as Vanguard Short-Term Bond Index, or in a high tax bracket, Vanguard Limited-Term Tax-Exempt. Both of these funds have very little interest-rate risk; if interest rates rise by 1%, you might lose 3% of your investment, and make it up in three years.

But for money you will need in a few years, that is as much risk as you should take; you don't want your down payment in a fund which could reduce the down payment by enough that you won't have it when you need it.
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Re: Is it a waste keeping money in a money market account?

Post by CascadiaSoonish » Fri Nov 02, 2018 11:41 pm

I'm sitting on a larger-than-I'd-like-to-have-idle amount of cash in a Capital One money market account; but that money is earmarked for a commercial real estate purchase next year. I figure the ~1% I'm giving up is just the cost of having the money at least earning something while still being guaranteed against loss before it gets deployed in the next twelve months.

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Re: Is it a waste keeping money in a money market maccount?

Post by bltn » Sat Nov 03, 2018 12:07 am

grabiner wrote:
Fri Nov 02, 2018 10:09 pm
Jesteroftheswamp wrote:
Fri Nov 02, 2018 2:27 pm
I have about $60K in a money market account, with $15-20K of that being allotted for emergency fund and the rest for a down payment. I hate leaving this much in a money market account however I may need it within the next few years. Is this a suitable place to store this much money given my goals of buying property in the next few years?
You could do a little better in a short-term fund, such as Vanguard Short-Term Bond Index, or in a high tax bracket, Vanguard Limited-Term Tax-Exempt. Both of these funds have very little interest-rate risk; if interest rates rise by 1%, you might lose 3% of your investment, and make it up in three years.

But for money you will need in a few years, that is as much risk as you should take; you don't want your down payment in a fund which could reduce the down payment by enough that you won't have it when you need it.
Look at the one year returns of the Vanguard Prime Money Market and the Vanguard Short Trerm investment Grade Bond Fund before you decide if the money market is a bad place to hold short term money in this rising interest rate environment.

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Re: Is it a waste keeping money in a money market maccount?

Post by Jesteroftheswamp » Sat Nov 03, 2018 11:02 pm

KlangFool wrote:
Fri Nov 02, 2018 3:15 pm
Jesteroftheswamp wrote:
Fri Nov 02, 2018 2:27 pm
I have about $60K in a money market account, with $15-20K of that being allotted for emergency fund and the rest for a down payment. I hate leaving this much in a money market account however I may need it within the next few years. Is this a suitable place to store this much money given my goals of buying property in the next few years?
Jesteroftheswamp,

Why do you need to save 40K for a down payment? What is your annual savings?

KlangFool
I need the $40K for a down payment as that will most likely equal 20% of home purchase price.

Would it be worth moving money from any current Cap One Money Market Account earning 1.75% into Vanguard Prime Money Market Fund?

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Re: Is it a waste keeping money in a money market maccount?

Post by sarabayo » Sat Nov 03, 2018 11:23 pm

PrettyCoolWorkshop wrote:
Fri Nov 02, 2018 2:37 pm
In my experience, money market account yields have not done any better than bank account yields since I've been an adult (about a decade). Currently, FZFXX offers a yield of 1.83% while ally penalty free CD's are offering 2.1%. I am also not 100% sure whether the FZFXX yield includes its expense ratio of .42%, but it is worse regardless. (click on monthly fact sheet for best info on FZFXX here: https://fundresearch.fidelity.com/mutua ... /316341304)

SPAXX is similarly disappointing at 1.82%. If you want to keep this cash fairly liquid, but earn a little bit better money, get an Ally penalty-free CD.
Fidelity's money market funds are a little lackluster compared to Vanguard's. As sport mentioned, VMMXX has a seven-day yield of 2.21% which is higher than Ally's penalty-free CD at 2.1% while also being more liquid.

By the way, I don't get how Ally's penalty-free CD works. In what way is it "really" a CD? If interest rates go up, what stops you from just withdrawing the money and opening a new CD at the higher rate? You could do that again and again every 6 days, since Ally says there are no penalties for withdrawing after 6 days, and they say they even compound your interest daily for you. Or do they mean that they do the compounding daily but only pay it out monthly, or something? Even then, you could just treat it as a 1-month CD with a 2.1% APR, so why make it an 11-month CD in the first place?
PrettyCoolWorkshop wrote:
Fri Nov 02, 2018 2:37 pm
Generally, I often find the prospectuses for money market accounts confusing and obfuscating. They should just try to do their best to state their current real yield and the distribution of investments they are composed of (by maturity). Instead, they report their NAV to be $1 (why?) and state that they are invested in "treasury bills" or "US government repurchase agreements" of unknown yield and no relation to information that can be looked up.
Are you talking about money market accounts or money market funds? I guess you mean funds since I don't think accounts have prospectuses (do they?)

Personally I don't care what's in my money market fund as long as it's fully liquid (at amounts likely to be used by me, anyway -- I don't care about how liquid $100 million of it is, or even $1 million). NAV being $1 seems like a good thing, since it means you never lose the principal (never "break the buck"), which is the whole point of a money market fund. If I wanted a bond fund containing investments of particular maturities, I would just buy a bond fund containing those investments, so I don't understand your complaint here.

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Re: Is it a waste keeping money in a money market account?

Post by ruralavalon » Sun Nov 04, 2018 10:26 am

I think its great that you are saving for a substantial down payment on a home.

I think it may be worth moving from your 1.75% Capitol One money market account, how much it's worth depends on how far in the future your planned home purchase might be.

Jesteroftheswamp wrote:
Fri Nov 02, 2018 2:27 pm
I have about $60K in a money market account, with $15-20K of that being allotted for emergency fund and the rest for a down payment. I hate leaving this much in a money market account however I may need it within the next few years. Is this a suitable place to store this much money given my goals of buying property in the next few years?
You could consider --
1) high yield savings or short-term CDs (for rates see www.bankrate.com),
2) Vanguard Prime Money Market Fund (VMMXX) current SEC Yield = 2.21%,
3) Vanguard Ultra Short-term Bond Fund (VUBFX) current SEC Yield = 2.58%, or
4) a good credit quality Vanguard short-term bond Fund.

How long is "in the next few years"?
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Re: Is it a waste keeping money in a money market maccount?

Post by Jesteroftheswamp » Sun Nov 04, 2018 4:04 pm

bltn wrote:
Sat Nov 03, 2018 12:07 am
grabiner wrote:
Fri Nov 02, 2018 10:09 pm
Jesteroftheswamp wrote:
Fri Nov 02, 2018 2:27 pm
I have about $60K in a money market account, with $15-20K of that being allotted for emergency fund and the rest for a down payment. I hate leaving this much in a money market account however I may need it within the next few years. Is this a suitable place to store this much money given my goals of buying property in the next few years?

You could do a little better in a short-term fund, such as Vanguard Short-Term Bond Index, or in a high tax bracket, Vanguard Limited-Term Tax-Exempt. Both of these funds have very little interest-rate risk; if interest rates rise by 1%, you might lose 3% of your investment, and make it up in three years.

But for money you will need in a few years, that is as much risk as you should take; you don't want your down payment in a fund which could reduce the down payment by enough that you won't have it when you need it.
Look at the one year returns of the Vanguard Prime Money Market and the Vanguard Short Trerm investment Grade Bond Fund before you decide if the money market is a bad place to hold short term money in this rising interest rate environment.

Can you elaborate please?

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Re: Is it a waste keeping money in a money market account?

Post by Jesteroftheswamp » Sun Nov 04, 2018 4:07 pm

ruralavalon wrote:
Sun Nov 04, 2018 10:26 am
I think its great that you are saving for a substantial down payment on a home.

I think it may be worth moving from your 1.75% Capitol One money market account, how much it's worth depends on how far in the future your planned home purchase might be.

Jesteroftheswamp wrote:
Fri Nov 02, 2018 2:27 pm
I have about $60K in a money market account, with $15-20K of that being allotted for emergency fund and the rest for a down payment. I hate leaving this much in a money market account however I may need it within the next few years. Is this a suitable place to store this much money given my goals of buying property in the next few years?
You could consider --
1) high yield savings or short-term CDs (for rates see www.bankrate.com),
2) Vanguard Prime Money Market Fund (VMMXX) current SEC Yield = 2.21%,
3) Vanguard Ultra Short-term Bond Fund (VUBFX) current SEC Yield = 2.58%, or
4) a good credit quality Vanguard short-term bond Fund.

How long is "in the next few years"?
I really don’t know how long “in the next few years” is as I am very indecisive on this. I’m not married and I don’t have kids, so there is no real urgency for me to buy other than the fact that I hate renting for years when I could easily afford a house or preferably at this particular time in my life, a condo. I would say realistically, five years is the absolute max, but could be as short as 1-2 years.

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Re: Is it a waste keeping money in a money market account?

Post by ruralavalon » Sun Nov 04, 2018 4:36 pm

Jesteroftheswamp wrote:
Sun Nov 04, 2018 4:07 pm
ruralavalon wrote:
Sun Nov 04, 2018 10:26 am
I think its great that you are saving for a substantial down payment on a home.

I think it may be worth moving from your 1.75% Capitol One money market account, how much it's worth depends on how far in the future your planned home purchase might be.

Jesteroftheswamp wrote:
Fri Nov 02, 2018 2:27 pm
I have about $60K in a money market account, with $15-20K of that being allotted for emergency fund and the rest for a down payment. I hate leaving this much in a money market account however I may need it within the next few years. Is this a suitable place to store this much money given my goals of buying property in the next few years?
You could consider --
1) high yield savings or short-term CDs (for rates see www.bankrate.com),
2) Vanguard Prime Money Market Fund (VMMXX) current SEC Yield = 2.21%,
3) Vanguard Ultra Short-term Bond Fund (VUBFX) current SEC Yield = 2.58%, or
4) a good credit quality Vanguard short-term bond Fund.

How long is "in the next few years"?
I really don’t know how long “in the next few years” is as I am very indecisive on this. I’m not married and I don’t have kids, so there is no real urgency for me to buy other than the fact that I hate renting for years when I could easily afford a house or preferably at this particular time in my life, a condo. I would say realistically, five years is the absolute max, but could be as short as 1-2 years.
For 1-2 years it's worth switching in my opinion. An increase in rate of .46% by switching VMMXX gives you another $184 per year. An increase in rate of .83% by switching to VUBFX gives you another $332 per year.

You could look at a good credit quality Vanguard short-term bond fund if it may be as long as 5 years.
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Re: Is it a waste keeping money in a money market account?

Post by mickeyd » Sun Nov 04, 2018 4:49 pm

Is this a suitable place to store this much money given my goals of buying property in the next few years?
$60K is not that much to be invested in PMMF. Of course, it all depends on what the rest of your stash looks like. It's currently yielding >2.20% and increasing weekly. OP mentions "a few years". If we are referring to 2 years, I would stash part in TSM and the balance in PMMF. You decide part and balance.
Last edited by mickeyd on Sun Nov 04, 2018 5:10 pm, edited 1 time in total.
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Re: Is it a waste keeping money in a money market account?

Post by MisterMister » Sun Nov 04, 2018 4:57 pm

You can get a tad better return than most alternatives mentioned using treasury bills.

treasurydirect.com can draft funds right out of your bank money market and then return the sum at the end of the term.

13-week bonds have yielded about 2.32% recently, but the interest is not taxable at the state level which makes for a bump in the rate. A simple case is Massachussetts' tax which is a flat rate of 5.1%. This bumps the yield to a taxable equivalent of about 2.44%.

You can set up the bill to auto-renew for some number of periods.

A disadvantage is that you cannot be sure what the rate will be until after the purchase takes place. This might be a deal-breaker for some.

More importantly, though, you must KNOW you won't need the money until the maturation of the bill. If you're not sure about that, all the other solutions here are better even if they pay less interest.
Last edited by MisterMister on Sun Nov 04, 2018 9:53 pm, edited 4 times in total.

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Re: Is it a waste keeping money in a money market account?

Post by UpperNwGuy » Sun Nov 04, 2018 6:10 pm

I use Vanguard Prime Money Market Fund for my car fund and my vacation fund. I’m very pleased with its performance compared to certificates of deposit, Treasuries, and ultra short bond funds.

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Re: Is it a waste keeping money in a money market maccount?

Post by PrettyCoolWorkshop » Mon Nov 05, 2018 1:52 pm

sarabayo wrote:
Sat Nov 03, 2018 11:23 pm
PrettyCoolWorkshop wrote:
Fri Nov 02, 2018 2:37 pm
In my experience, money market account yields have not done any better than bank account yields since I've been an adult (about a decade). Currently, FZFXX offers a yield of 1.83% while ally penalty free CD's are offering 2.1%. I am also not 100% sure whether the FZFXX yield includes its expense ratio of .42%, but it is worse regardless. (click on monthly fact sheet for best info on FZFXX here: https://fundresearch.fidelity.com/mutua ... /316341304)

SPAXX is similarly disappointing at 1.82%. If you want to keep this cash fairly liquid, but earn a little bit better money, get an Ally penalty-free CD.
Fidelity's money market funds are a little lackluster compared to Vanguard's. As sport mentioned, VMMXX has a seven-day yield of 2.21% which is higher than Ally's penalty-free CD at 2.1% while also being more liquid.

By the way, I don't get how Ally's penalty-free CD works. In what way is it "really" a CD? If interest rates go up, what stops you from just withdrawing the money and opening a new CD at the higher rate? You could do that again and again every 6 days, since Ally says there are no penalties for withdrawing after 6 days, and they say they even compound your interest daily for you. Or do they mean that they do the compounding daily but only pay it out monthly, or something? Even then, you could just treat it as a 1-month CD with a 2.1% APR, so why make it an 11-month CD in the first place?
PrettyCoolWorkshop wrote:
Fri Nov 02, 2018 2:37 pm
Generally, I often find the prospectuses for money market accounts confusing and obfuscating. They should just try to do their best to state their current real yield and the distribution of investments they are composed of (by maturity). Instead, they report their NAV to be $1 (why?) and state that they are invested in "treasury bills" or "US government repurchase agreements" of unknown yield and no relation to information that can be looked up.
Are you talking about money market accounts or money market funds? I guess you mean funds since I don't think accounts have prospectuses (do they?)

Personally I don't care what's in my money market fund as long as it's fully liquid (at amounts likely to be used by me, anyway -- I don't care about how liquid $100 million of it is, or even $1 million). NAV being $1 seems like a good thing, since it means you never lose the principal (never "break the buck"), which is the whole point of a money market fund. If I wanted a bond fund containing investments of particular maturities, I would just buy a bond fund containing those investments, so I don't understand your complaint here.
Interesting for the vanguard vs. fidelity comparison.

Yeah I misused the word "account" when I really meant to say "the default money market sweep fund for a brokerage account".
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Re: Is it a waste keeping money in a money market account?

Post by banhbao » Mon Nov 05, 2018 4:27 pm

Jesteroftheswamp wrote:
Sun Nov 04, 2018 4:07 pm
I would say realistically, five years is the absolute max, but could be as short as 1-2 years.
FYI, you can get the following CD rates today from Vanguard:
1 year
2.65%

18 month
2.80%

2 year
3.05%

If you are sure not to use it for 1-2 years, you could enjoy a 2.65-3.05% return. With $45k that's $1200-$1370.

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Re: Is it a waste keeping money in a money market maccount?

Post by MisterMister » Tue Nov 06, 2018 2:13 pm

sarabayo wrote:
Sat Nov 03, 2018 11:23 pm
By the way, I don't get how Ally's penalty-free CD works. In what way is it "really" a CD? If interest rates go up, what stops you from just withdrawing the money and opening a new CD at the higher rate? You could do that again and again every 6 days, since Ally says there are no penalties for withdrawing after 6 days, and they say they even compound your interest daily for you. Or do they mean that they do the compounding daily but only pay it out monthly, or something? Even then, you could just treat it as a 1-month CD with a 2.1% APR, so why make it an 11-month CD in the first place?
I like Ally, I have a few CDs with them and I've had the 11-month no-penalty CD you mention. I suppose they still call it a CD because they are not allowed to "call" the CD if rates go down, guaranteeing that you get the quoted nominal rate for the full 11 months. The customer, OTOH, has the option after 6 days to do whatever he wants. Yes you can exit after 6 days. I took that free option to exit on mine, and there were no issues in doing that.

BTW the quoted 2.10% is APY, not APR. The corresponding APR is 2.08% compounded daily for the quoted annualized APY of 2.10%.

Ally's CD rates are generally very competitive. Obviously if you really intend to leave the money in for a year you can do better than 2.10%.

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Re: Is it a waste keeping money in a money market account?

Post by Jesteroftheswamp » Sat Nov 10, 2018 8:08 pm

mickeyd wrote:
Sun Nov 04, 2018 4:49 pm
Is this a suitable place to store this much money given my goals of buying property in the next few years?
$60K is not that much to be invested in PMMF. Of course, it all depends on what the rest of your stash looks like. It's currently yielding >2.20% and increasing weekly. OP mentions "a few years". If we are referring to 2 years, I would stash part in TSM and the balance in PMMF. You decide part and balance.
What is TSM?

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Re: Is it a waste keeping money in a money market account?

Post by sarabayo » Sat Nov 10, 2018 8:09 pm

Jesteroftheswamp wrote:
Sat Nov 10, 2018 8:08 pm
What is TSM?
I presume this referred to a Total Stock Market (TSM) index fund.

Austintatious
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Re: Is it a waste keeping money in a money market account?

Post by Austintatious » Sat Nov 10, 2018 8:43 pm

Capital One 360 money market is currently paying 2%.

https://www.capitalone.com/bank/savings ... t-account/

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Re: Is it a waste keeping money in a money market account?

Post by supernova » Sat Nov 10, 2018 8:49 pm

I Bonds (savings bonds) are another good option. You match inflation, plus right now you get a real rate of 0.5%. Plus it's tax-deferred interest

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Re: Is it a waste keeping money in a money market account?

Post by vwgrrc » Sat Nov 10, 2018 9:55 pm

Depends on how you define "a few years". If it's 2 year or longer, I would go with limited term TE. Otherwise, go Prime MM.

BTW, Prime MM (VMMXX)'s compound yield just reach 2.25% today and should still go higher. That beats virtually all online savings out there. I'm moving all of my savings to VMMXX on Monday :greedy

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Re: Is it a waste keeping money in a money market account?

Post by smectym » Sun Nov 11, 2018 1:23 am

Vanguard Prime is a great money market fund, and quite conservatively managed. Expenses low, yield high. However, I still prefer Vanguard’s all-Treasury-bill fund, Vanguard Treasury Money Market VUSXX, with a current yield at 2.12%, just slightly behind Prime, but bearing lower risk.

Prime invests in corporate paper. Therefore, due to regulations established post-financial crisis, in a future “in extremis” scenario investors in Prime may be subject to government-mandated “gates” (prohibitions against withdrawing funds) or “fees” (non-refundable haircuts on any amount investors were permitted to withdraw).

Treasury money market funds are not subject to such mandatory gates or fees. Here is Vanguard’s primer on the topic:

https://investor.vanguard.com/mutual-fu ... et-reform/

10 years on, memories of the “great financial crisis” have faded. Parsing the distinction between “very safe” (Vanguard Prime) and “even safer” (Vanguard Treasury) seems boring, even eccentric. But with any significant investment, I’d opt for “even safer” at the cost of a few basis points of yield.

Smectym

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Re: Is it a waste keeping money in a money market account?

Post by averagedude » Sun Nov 11, 2018 1:29 am

Jesteroftheswamp wrote:
Fri Nov 02, 2018 2:27 pm
I have about $60K in a money market account, with $15-20K of that being allotted for emergency fund and the rest for a down payment. I hate leaving this much in a money market account however I may need it within the next few years. Is this a suitable place to store this much money given my goals of buying property in the next few years?
If you are going to use it in less than 5 years, your strategy seems reasonable to me.

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Re: Is it a waste keeping money in a money market account?

Post by smectym » Sun Nov 11, 2018 1:46 am

averagedude wrote:
Sun Nov 11, 2018 1:29 am
Jesteroftheswamp wrote:
Fri Nov 02, 2018 2:27 pm
I have about $60K in a money market account, with $15-20K of that being allotted for emergency fund and the rest for a down payment. I hate leaving this much in a money market account however I may need it within the next few years. Is this a suitable place to store this much money given my goals of buying property in the next few years?
If you are going to use it in less than 5 years, your strategy seems reasonable to me.
averagedude, to press the point, still more reasonable for OP to move his $60,000 to Vanguard Treasury Money Market (or similar), especially since OP contemplates maintaining the position for several years.

Smectym

averagedude
Posts: 223
Joined: Sun May 13, 2018 3:41 pm

Re: Is it a waste keeping money in a money market account?

Post by averagedude » Sun Nov 11, 2018 1:59 am

smectym wrote:
Sun Nov 11, 2018 1:46 am
averagedude wrote:
Sun Nov 11, 2018 1:29 am
Jesteroftheswamp wrote:
Fri Nov 02, 2018 2:27 pm
I have about $60K in a money market account, with $15-20K of that being allotted for emergency fund and the rest for a down payment. I hate leaving this much in a money market account however I may need it within the next few years. Is this a suitable place to store this much money given my goals of buying property in the next few years?
If you are going to use it in less than 5 years, your strategy seems reasonable to me.
averagedude, to press the point, still more reasonable for OP to move his $60,000 to Vanguard Treasury Money Market (or similar), especially since OP contemplates maintaining the position for several years.

Smectym
Yes, should had read it more closely because i assumed it was Vanguard prime money market. If he has a money market account at one of the monster mega banks he could be earning very little. Better to put it in a money market fund at Vanguard or an online savings account earning 1.9% or better.

smectym
Posts: 235
Joined: Thu May 26, 2011 5:07 pm

Re: Is it a waste keeping money in a money market account?

Post by smectym » Sun Nov 11, 2018 2:30 am

averagedude wrote:
Sun Nov 11, 2018 1:59 am
smectym wrote:
Sun Nov 11, 2018 1:46 am
averagedude wrote:
Sun Nov 11, 2018 1:29 am
Jesteroftheswamp wrote:
Fri Nov 02, 2018 2:27 pm
I have about $60K in a money market account, with $15-20K of that being allotted for emergency fund and the rest for a down payment. I hate leaving this much in a money market account however I may need it within the next few years. Is this a suitable place to store this much money given my goals of buying property in the next few years?
If you are going to use it in less than 5 years, your strategy seems reasonable to me.
averagedude, to press the point, still more reasonable for OP to move his $60,000 to Vanguard Treasury Money Market (or similar), especially since OP contemplates maintaining the position for several years.

Smectym
Yes, should had read it more closely because i assumed it was Vanguard prime money market. If he has a money market account at one of the monster mega banks he could be earning very little. Better to put it in a money market fund at Vanguard or an online savings account earning 1.9% or better.
Quite right, I think somewhere up the string OP belatedly clarified that his money is in some sort of brokerage core account, but it’s worthwhile to note that many investors are vague on the distinction between so-called “bank money market accounts” with non-competitive yields, and true market-based money market mutual funds.

However, even within the latter universe, the distinction must be drawn between funds which invest in short term corporate paper (e.g. Vanguard Prime) versus those which exclusively invest in short term treasury securities issued by the US government (e.g. Vanguard Treasury).

My argument is that for those investors who intend to maintain significant positions in money market funds or some length of time, it’s probably a better call to put that money in a treasury-only money market fund, for reasons I’ve stated above.
And which Vanguard conveniently summarize here:
https://investor.vanguard.com/mutual-fu ... et-reform/

Smectym

jalbert
Posts: 3815
Joined: Fri Apr 10, 2015 12:29 am

Re: Is it a waste keeping money in a money market account?

Post by jalbert » Sun Nov 11, 2018 2:46 am

In my experience, money market account yields have not done any better than bank account yields since I've been an adult (about a decade). Currently, FZFXX offers a yield of 1.83% while ally penalty free CD's are offering 2.1%.
That’s because the expense ratio of FZFXX is too high. If you want equivalent safety to an FDIC insured bank account at the balance of the OP VUSXX is yielding 2.12%.
Risk is not a guarantor of return.

CurlyDave
Posts: 733
Joined: Thu Jul 28, 2016 11:37 am

Re: Is it a waste keeping money in a money market account?

Post by CurlyDave » Sun Nov 11, 2018 7:22 am

Jesteroftheswamp wrote:
Fri Nov 02, 2018 2:27 pm
...given my goals of buying property in the next few years?
This tells me you don't have a definite date you will buy property -- just a goal of buying in the intermediate-term future.

My suggestion will be controversial, but I think you will be better served with putting the money in index fund or something like SPY in a taxable account. The odds are with you that it will outperform any riskless investment, and if there is a general market decline, you can wait for a recovery. You have no specific timetable.

During our accumulation phase DW and I always did this with rental property purchases.

Stocks and real estate sometimes move in opposite directions and we were able to pick up rental properties, think starter homes, when real estate was down and stocks were up.

Now someone will yell "market timing", but it really isn't. It is more like arbitrage in different markets.

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