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CD vs Vanguard Federal Money Market Fund (VMFXX) vs T - bills
Posted on 10/2/23 at 9:44 am
Posted on 10/2/23 at 9:44 am
What would the be advantages of cds or tbills over VMFXX in taxable account for modest rainy day fund? Vmfxx has a 5.3% 7 day sec yield (been similar for a while now). I feel like those rates are similar or better than the ither options and Vmfxx would be more liquid?
My understanding is a large portion of VMFXX's holdings would be tbills and other secure government debt.
I guess with cds and t bills you give up a little liquidity for guaranteed/stable returns?
My understanding is a large portion of VMFXX's holdings would be tbills and other secure government debt.
I guess with cds and t bills you give up a little liquidity for guaranteed/stable returns?
5
Posted on 10/2/23 at 9:56 am to Gator feather
Remember that the CD term binds both sides—you and the bank. A long term CD makes sense if you think there is a chance of rates coming down. Those high money market rates can disappear with the quickness.
Posted on 10/2/23 at 9:58 am to Gator feather
IMO the good thing about VMFXX, and others like it, is you get interest paid every month. That is key to me. I like to reinvest those funds.
Just so you know, some brokerages will charge you a fee to buy VMFXX. Others won't. Schwab will want you to buy SNOXX instead which is a similar product.
Just so you know, some brokerages will charge you a fee to buy VMFXX. Others won't. Schwab will want you to buy SNOXX instead which is a similar product.
Posted on 10/2/23 at 10:49 am to Gator feather
Duration. Money Markets are great as the rates have risen and stayed higher. But CDs can lock a rate with surety for a longer period of time.
One is not 'better'...they just have tradeoffs.
One is not 'better'...they just have tradeoffs.
Posted on 10/2/23 at 10:57 am to lynxcat
Yup… if you suspect that rates will continue to rise, you can take advantage of that in VMFXX too
Posted on 10/2/23 at 11:03 am to lynxcat
VMFXX invests in agency short term paper along with Tbills. If you want a straight Tbill MMF go with Vanguard Treasury. Current 7-day yields are Federal 5.3% and Treasury 5.24%.
Posted on 10/2/23 at 12:01 pm to Gator feather
CDs - you pay local and state tax.
Posted on 10/2/23 at 12:36 pm to Gator feather
In LA you save up to 4.25% in state taxes on a government money market and/or treasuries.
A 5.3% yield can be as high as 5.53% in tax equivalent yield. States with higher income taxes benefit even more vs CDs.
A 5.3% yield can be as high as 5.53% in tax equivalent yield. States with higher income taxes benefit even more vs CDs.
Posted on 10/2/23 at 4:47 pm to KillTheGophers
I think only a portion of VMFXX is exempt from local and state taxes.
So you pay federal taxes on all of them, pay local and state taxes on CDs, pay local and state taxes on a portion of VMFXX and pay no local or state taxes on tbills
So you pay federal taxes on all of them, pay local and state taxes on CDs, pay local and state taxes on a portion of VMFXX and pay no local or state taxes on tbills
Posted on 10/3/23 at 2:17 pm to Suntiger
What about VWALX? I've been seriously looking into it. 30 Day SEC 4.64%
Posted on 10/30/23 at 9:02 am to Suntiger
I’m currently in VMFXX but was wondering is there a difference in just keeping money in the settlement fund (which I believe is VMFXX) and buying VMFXX?
This post was edited on 10/30/23 at 9:11 am
Posted on 10/30/23 at 2:56 pm to LSUSports247
No it's the same either way. If you'd rather they actually have a cash option that's insured like a savings acct but you'll give up the yield.
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