Most high yield savings accounts offer about 4%, but Vanguard offers 4.76% for the federal money market fund in my brokerage account. Is the fund a better option or are there drawbacks I’m not aware of? TC 350
Saving account yield that have variable APR are not better than money markets. In fact banks plays intermediary role and do the same. Vanguard is like Walmart of fund manager. They have lowest fees out there. Unless you have liquidity problems or amount more than 1M, I would probably not look into other options. The time when savings account offer fixed yields such are treasury bonds then things get interesting. We are at top of Fed funds rate in current cycle and that would be better than money market but there is no one other than treasury offering that today.
Aren’t both participating in the same repo market transactions? but MMF has basically less features/fees?
That’s correct but do individual and retailers have access to low cost MMF? Unless you have big cash then vanguard is your best shot.
T bills to avoid state tax
Treasurydirect.gov sucks, what's the other place to buy t-bills?
A brokerage
Money market funds are not FDIC insured.
With Vanguard Federal money market fund (VMFXX), 37.79% of interest/dividend is exempt from state and local taxes. That's an advantage. If you directly buy t-bills, 100% of interest is exempt from state and local taxes.
For folks who are saying it’s not FIDC insured are wrong. Your money is protected by SIPC that’s same for any investment account and has commensurate insurance and procreation value as FIDC. That’s because investments are protected based on underlying security value and not face value. https://investor.vanguard.com/investment-products/cash-investments#:~:text=Money%20market%20funds%20and%20other,to%20%24250%2C000%20by%20FDIC%20insurance.
They’re not wrong… SIPC <> FDIC. It’s insured, just a different way.
Ignorance vs stupidity, which is worse?
Vanguard fund has expense ratio (but small, 0.10%), minimum $3k deposit (non concern for Blind TCs), not FDIC insured but if Vanguard goes bust we have bigger problems.
I don’t think the $3k minimum applies to the federal money market fund because it’s just the settlement fund of your brokerage account on vanguard
They are SIPC secured. FIDC is only for banks.