Any reason to put cash into HYSA/T bills/I bonds over VMFXX?
Been trying to find a high interest rate savings account for 100k cash, but banks keep changing rates to match each other/get people to sign up and then lower the rate 3 months later etc. Been looking at VMFXX as I already have a Vanguard brokerage account. Seems like it may simply be more convenient than shuffling money into and out of bank accounts. It's not FDIC insured but the underlying securities mostly are so this seems relatively risk free. Am I missing anything? Any nasty tax consequences compared to a saving account, or any other thoughts?
Aren’t T bonds like 10% rn but VMXX is <2%?
Vmfxx is 4%
I bonds are a variable 7% right now. both 1 year and 30 yr treasuries are around 4%. But you can only buy 10k of I bonds per year I'm a fan of money market funds myself
Actually you have a tax benefit with vmfxx in that ~70% of your gains aren't taxed at state level. I moved everything from hysa into vmfxx. More liquid so I'm ready to pounce on stocks. Lack of FDIC insurance doesn't bother me.
Good point!
VMFXX: Yield could change. T-bill: when you sell it, if interest rate gets higher than now, you will be selling at discount. I-bond: annual limit on how much you can purchase. If you are looking to invest in fixed income, try balance credit/interest risk and consider liquidity requirements.
Thanks for the succinct summary, will look more into these factors
Check out the federal tax advantaged money market form vanguard. It is called vmsxx. For me it comes out quite a bit ahead due to the tax savings. On the other hand it doesn't have a state tax savings to my knowledge so keep that in mind when comparing. Edit: 100% of VMSXX is not taxed by federal income tax or NIIT tax. At the highest bracket that is 40.8%, or 37% plus 3.8%.
Sweet, will take a look. VMFXX was just what I came across, not sure what other money market funds or other low risk parking options are out there with Vanguard
VMSXX is 1% lower yield than VMFXX
Im not sure on whether it is ideal, but i did this myself. Moved a chunk of cash i have queued up for downpayment / loan repayment into VMFXX. I need this money to be completely liquid. I didnt want to open a new hysa account and chase was offering shit rates. From my reading there is still risk of money market funds dropping below their nav value of $1, but it is extremely low. Happened in 2008 though, and some funds dropped to $0.97 or something.
I never invest in bonds
VMFXX price fluctuates doesn’t it? So you are still at the mercy of market forces to get your return and even risk your initial capital. With HYSA and T bills you do not risk capital and a return is guaranteed. Just keep your HYSA balance below the $250k threshold for FDIC insurance. Personally, I’m doing a mix. I’ve got cash in HYSA, bought $20k in I bonds at the high rates, and a ladder of 4- and 8-week T bills.
Hysa changes too. And hysa is lower yield than MM funds.
Not the same. When you invest money in an MM fund you risk losing your principal if the fund drops. In an HYSA, the return rate might decrease but you don’t risk losing your original principal. HYSA is better for similar rates of return.
Vio Bank 4.01%
No, how much do you care about your 3% vs just waiting for the stock market to rebound in a year to make 50%? Just chill with your cash, don't worry about this small noise and wait it out, don't stress about your 3% returns