Vanguard Federal Money Market tops 5%

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
fetch5482
Posts: 1722
Joined: Fri Aug 15, 2014 4:55 pm

Re: Vanguard Federal Money Market tops 5%

Post by fetch5482 »

billaster wrote: Sat May 27, 2023 1:15 pm
Yvy wrote: Sat May 27, 2023 11:59 am Is there any difference between using Vanguard Federal Money Market Fund (VMFXX) vs its admiral counterpart (VMRXX)?
They are almost identical with almost identical holdings. VMFXX is the default brokerage settlement fund. VMRXX is a legacy fund which used to be the Vanguard Prime Money Market Fund but was converted from a prime fund to a government fund in 2020.

I'm not sure why Vanguard continues to maintain the two since they are so similar. There's one possibility I could think of. Vanguard allows one to exchange between any two mutual funds but not between the settlement fund and another fund. You have to buy and sell, not exchange, when using the settlement fund. However, you can exchange between VMRXX and any other fund. It still seems to be a very minor difference.
The big difference is when you're trying to withdraw the money to another account outside vanguard. With VMFXX you transfer out before 4pm, the money is in the remote account by next morning. With VMRXX you have to sell first then transfer out the next day, so money shows up in remote account by the 2nd morning.
(AGE minus 23%) Bonds | 5% REITs | Balance 80% US (75/25 TSM/SCV) + 20% International (80/20 Developed/Emerging)
Yvy
Posts: 149
Joined: Sun Sep 04, 2022 9:46 pm

Re: Vanguard Federal Money Market tops 5%

Post by Yvy »

Thanks Folks. I will probably go with VFMXX. I also heard it is the only one allowing check writings...
I have to buy that in my brokerage account right? For some reasons I thought there will be a different money market fund account, sounds like I did not understood the concept well.
chinchin
Posts: 830
Joined: Tue Nov 14, 2017 7:02 pm

Re: Vanguard Federal Money Market tops 5%

Post by chinchin »

Yvy wrote: Sun May 28, 2023 3:18 pm Thanks Folks. I will probably go with VFMXX. I also heard it is the only one allowing check writings...
I have to buy that in my brokerage account right? For some reasons I thought there will be a different money market fund account, sounds like I did not understood the concept well.
VFMXX is the default settlement account for Vanguard Brokerage Services.
not financial advice
Soobs
Posts: 71
Joined: Sun Nov 01, 2020 10:38 pm

Re: Vanguard Federal Money Market tops 5%

Post by Soobs »

What's the advantage of holding cash in VMFXX vs something like USFR which is 100% treasuries (fully exempt from state/local taxes)?
homebuyer6426
Posts: 1833
Joined: Tue Feb 07, 2017 8:08 am

Re: Vanguard Federal Money Market tops 5%

Post by homebuyer6426 »

AlmstRtrd wrote: Sat May 27, 2023 5:03 am
homebuyer6426 wrote: Fri May 19, 2023 12:42 pm Fidelity Government Cash Reserves FDRXX paying 4.75% at the moment as well.
Just checked and the expense ration on FDRXX is 0.34%. So about 4.41% net of expenses. Not trying to correct what you wrote... just checking as both my wife & I use FDRXX at Fidelity.
Thanks I wasn't aware of that... I've got to check the fine print
43% Total Stock Market | 53% Consumer Staples | 4% Short Term Reserves
exodusNH
Posts: 10347
Joined: Wed Jan 06, 2021 7:21 pm

Re: Vanguard Federal Money Market tops 5%

Post by exodusNH »

Soobs wrote: Sun May 28, 2023 5:07 pm What's the advantage of holding cash in VMFXX vs something like USFR which is 100% treasuries (fully exempt from state/local taxes)?
Money is available next day vs two.

There will be a SEC sales charge for USFR.
User avatar
Stinky
Posts: 14156
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Vanguard Federal Money Market tops 5%

Post by Stinky »

AlmstRtrd wrote: Sat May 27, 2023 5:03 am
homebuyer6426 wrote: Fri May 19, 2023 12:42 pm Fidelity Government Cash Reserves FDRXX paying 4.75% at the moment as well.
Just checked and the expense ration on FDRXX is 0.34%. So about 4.41% net of expenses. Not trying to correct what you wrote... just checking as both my wife & I use FDRXX at Fidelity.
The fidelity fund is paying 4.75%.

Money market yields are always quoted net of expenses. So there’s no need to subtract out the 0.34% again.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
minesweep
Posts: 1670
Joined: Fri Mar 02, 2007 8:17 pm
Location: 27,000 light years from the Galactic Center of the Milky Way Galaxy (the suburbs)

Re: Vanguard Federal Money Market tops 5%

Post by minesweep »

WolfgangPauli wrote: Sun May 21, 2023 7:07 am Interesting development and not surprising. As a follow on question, I have been using VUSXX as my money fund. U.S. Government Obligations isn't at 5% yet but close enough.

However, should I be concerned that the "Daily Market Value" is now below $1.00. (It is $.9997) and I know that is 4 decimal points etc. however the last time we had a financial crisis the "breaking the buck" on MM funds was a big deal. I assume this is not a big deal and just a rounding error but would like some thoughts.
It's there now. VUSXX is currently 5.04%. Dividends are 100% from U.S. government obligations (0% tax for my state). In 2022 U.S. Government Obligations were 37.79% for VMFXX and 53% for VMRXX.
Time is your friend; impulse is your enemy - John Bogle | Learn every day, but especially from the experiences of others, it's cheaper! - John Bogle
retiringwhen
Posts: 4743
Joined: Sat Jul 08, 2017 10:09 am
Location: New Jersey, USA

Re: Vanguard Federal Money Market tops 5%

Post by retiringwhen »

minesweep wrote: Wed May 31, 2023 4:56 pm
WolfgangPauli wrote: Sun May 21, 2023 7:07 am Interesting development and not surprising. As a follow on question, I have been using VUSXX as my money fund. U.S. Government Obligations isn't at 5% yet but close enough.

However, should I be concerned that the "Daily Market Value" is now below $1.00. (It is $.9997) and I know that is 4 decimal points etc. however the last time we had a financial crisis the "breaking the buck" on MM funds was a big deal. I assume this is not a big deal and just a rounding error but would like some thoughts.
It's there now. VUSXX is currently 5.04%. Dividends are 100% from U.S. government obligations (0% tax for my state). In 2022 U.S. Government Obligations were 37.79% for VMFXX and 53% for VMRXX.
VUSXX is around 60% USGO so far this year. They are holding a large chunk of Reverse Repos that are not exempt from state taxes. VRMXX and VMFXX are running just over 40% USGO this year so far. All of these percentages will surely change by the end of the year.
minesweep
Posts: 1670
Joined: Fri Mar 02, 2007 8:17 pm
Location: 27,000 light years from the Galactic Center of the Milky Way Galaxy (the suburbs)

Re: Vanguard Federal Money Market tops 5%

Post by minesweep »

VUSXX prior year percentages of ordinary dividends from U.S. Government Obligations
2022 - 100%
2021 - 100%
2020 - 94.19%
2019 - 97.79%
2018 - 100%
2017 - 100%
2016 - 100%
Time is your friend; impulse is your enemy - John Bogle | Learn every day, but especially from the experiences of others, it's cheaper! - John Bogle
retiringwhen
Posts: 4743
Joined: Sat Jul 08, 2017 10:09 am
Location: New Jersey, USA

Re: Vanguard Federal Money Market tops 5%

Post by retiringwhen »

2023
EDGAR Date Ticker Repos USGO Treasuries Total USGO
1/31/2023 VUSXX 23.20% 4.30% 72.40% 76.7%
2/28/2023 VUSXX 24.30% 4.10% 71.60% 71.6%
3/31/2023 VUSXX 41.50% 7.41% 51.09% 51.0%
4/30/2023 VUSXX 43.00% 2.42% 54.58% 54.58%

Asset Weighted Average YTD = 65.88%
nyclon
Posts: 664
Joined: Fri Oct 02, 2015 5:30 pm

Re: Vanguard Federal Money Market tops 5%

Post by nyclon »

fetch5482 wrote: Sat May 27, 2023 1:49 pm
billaster wrote: Sat May 27, 2023 1:15 pm
Yvy wrote: Sat May 27, 2023 11:59 am Is there any difference between using Vanguard Federal Money Market Fund (VMFXX) vs its admiral counterpart (VMRXX)?
They are almost identical with almost identical holdings. VMFXX is the default brokerage settlement fund. VMRXX is a legacy fund which used to be the Vanguard Prime Money Market Fund but was converted from a prime fund to a government fund in 2020.

I'm not sure why Vanguard continues to maintain the two since they are so similar. There's one possibility I could think of. Vanguard allows one to exchange between any two mutual funds but not between the settlement fund and another fund. You have to buy and sell, not exchange, when using the settlement fund. However, you can exchange between VMRXX and any other fund. It still seems to be a very minor difference.
The big difference is when you're trying to withdraw the money to another account outside vanguard. With VMFXX you transfer out before 4pm, the money is in the remote account by next morning. With VMRXX you have to sell first then transfer out the next day, so money shows up in remote account by the 2nd morning.
VMRXX sell order proceeds arrive the next morning into bank accounts for orders placed before 4pm for me when I select “wire” as disbursement method.
Soobs
Posts: 71
Joined: Sun Nov 01, 2020 10:38 pm

Re: Vanguard Federal Money Market tops 5%

Post by Soobs »

exodusNH wrote: Wed May 31, 2023 12:01 pm
Soobs wrote: Sun May 28, 2023 5:07 pm What's the advantage of holding cash in VMFXX vs something like USFR which is 100% treasuries (fully exempt from state/local taxes)?
Money is available next day vs two.

There will be a SEC sales charge for USFR.
Okay so really it’s just slightly more liquid to hold the money market account due to funds being available in one vs two days? It’s my understanding the SEC sales charge is only $8 for every million dollars. Notable, but that difference really wouldn’t factor into my decision especially when assuring a full state/local tax exemption. Thanks for the info.
exodusNH
Posts: 10347
Joined: Wed Jan 06, 2021 7:21 pm

Re: Vanguard Federal Money Market tops 5%

Post by exodusNH »

Soobs wrote: Mon Jun 05, 2023 11:55 am
exodusNH wrote: Wed May 31, 2023 12:01 pm
Soobs wrote: Sun May 28, 2023 5:07 pm What's the advantage of holding cash in VMFXX vs something like USFR which is 100% treasuries (fully exempt from state/local taxes)?
Money is available next day vs two.

There will be a SEC sales charge for USFR.
Okay so really it’s just slightly more liquid to hold the money market account due to funds being available in one vs two days? It’s my understanding the SEC sales charge is only $8 for every million dollars. Notable, but that difference really wouldn’t factor into my decision especially when assuring a full state/local tax exemption. Thanks for the info.
That fee varies. It was recently $23 per $1M, but obviously still pretty small.

It really boils down to being a bit more liquid. You've currently got a 2 day settlement before you can put in a separate transaction to get the money to your bank.
Soobs
Posts: 71
Joined: Sun Nov 01, 2020 10:38 pm

Re: Vanguard Federal Money Market tops 5%

Post by Soobs »

exodusNH wrote: Mon Jun 05, 2023 12:45 pm
Soobs wrote: Mon Jun 05, 2023 11:55 am
exodusNH wrote: Wed May 31, 2023 12:01 pm
Soobs wrote: Sun May 28, 2023 5:07 pm What's the advantage of holding cash in VMFXX vs something like USFR which is 100% treasuries (fully exempt from state/local taxes)?
Money is available next day vs two.

There will be a SEC sales charge for USFR.
Okay so really it’s just slightly more liquid to hold the money market account due to funds being available in one vs two days? It’s my understanding the SEC sales charge is only $8 for every million dollars. Notable, but that difference really wouldn’t factor into my decision especially when assuring a full state/local tax exemption. Thanks for the info.
That fee varies. It was recently $23 per $1M, but obviously still pretty small.

It really boils down to being a bit more liquid. You've currently got a 2 day settlement before you can put in a separate transaction to get the money to your bank.
Gotcha. Sounds like at the end of the day two great options for now, but I’ll certainly be watching the SEC fee. The only other thing I could come up with is the $1 money market price vs the ETF NAV, but that NAV has been incredibly stable with only negligible shifts.
User avatar
fetch5482
Posts: 1722
Joined: Fri Aug 15, 2014 4:55 pm

Re: Vanguard Federal Money Market tops 5%

Post by fetch5482 »

Soobs wrote: Mon Jun 05, 2023 1:57 pm
exodusNH wrote: Mon Jun 05, 2023 12:45 pm
Soobs wrote: Mon Jun 05, 2023 11:55 am
exodusNH wrote: Wed May 31, 2023 12:01 pm
Soobs wrote: Sun May 28, 2023 5:07 pm What's the advantage of holding cash in VMFXX vs something like USFR which is 100% treasuries (fully exempt from state/local taxes)?
Money is available next day vs two.

There will be a SEC sales charge for USFR.
Okay so really it’s just slightly more liquid to hold the money market account due to funds being available in one vs two days? It’s my understanding the SEC sales charge is only $8 for every million dollars. Notable, but that difference really wouldn’t factor into my decision especially when assuring a full state/local tax exemption. Thanks for the info.
That fee varies. It was recently $23 per $1M, but obviously still pretty small.

It really boils down to being a bit more liquid. You've currently got a 2 day settlement before you can put in a separate transaction to get the money to your bank.
Gotcha. Sounds like at the end of the day two great options for now, but I’ll certainly be watching the SEC fee. The only other thing I could come up with is the $1 money market price vs the ETF NAV, but that NAV has been incredibly stable with only negligible shifts.
Wait, USFR is an ETF, so subject to 3-day settlement. In other words, you need 4 days for the cash to show up in your bank account, not 2. If you use VMRXX or VUSXX or another mutual fund it'll be 2 days. VMFXX (settlement fund) is next day.

Also, unlike money market funds, USFR does not maintain a $1 balance, so there is a greater risk of losing part of the principal with USFR due to daily price fluctuations..
(AGE minus 23%) Bonds | 5% REITs | Balance 80% US (75/25 TSM/SCV) + 20% International (80/20 Developed/Emerging)
Soobs
Posts: 71
Joined: Sun Nov 01, 2020 10:38 pm

Re: Vanguard Federal Money Market tops 5%

Post by Soobs »

fetch5482 wrote: Mon Jun 05, 2023 4:07 pm
Soobs wrote: Mon Jun 05, 2023 1:57 pm
exodusNH wrote: Mon Jun 05, 2023 12:45 pm
Soobs wrote: Mon Jun 05, 2023 11:55 am
exodusNH wrote: Wed May 31, 2023 12:01 pm

Money is available next day vs two.

There will be a SEC sales charge for USFR.
Okay so really it’s just slightly more liquid to hold the money market account due to funds being available in one vs two days? It’s my understanding the SEC sales charge is only $8 for every million dollars. Notable, but that difference really wouldn’t factor into my decision especially when assuring a full state/local tax exemption. Thanks for the info.
That fee varies. It was recently $23 per $1M, but obviously still pretty small.

It really boils down to being a bit more liquid. You've currently got a 2 day settlement before you can put in a separate transaction to get the money to your bank.
Gotcha. Sounds like at the end of the day two great options for now, but I’ll certainly be watching the SEC fee. The only other thing I could come up with is the $1 money market price vs the ETF NAV, but that NAV has been incredibly stable with only negligible shifts.
Wait, USFR is an ETF, so subject to 3-day settlement. In other words, you need 4 days for the cash to show up in your bank account, not 2. If you use VMRXX or VUSXX or another mutual fund it'll be 2 days. VMFXX (settlement fund) is next day.

Also, unlike money market funds, USFR does not maintain a $1 balance, so there is a greater risk of losing part of the principal with USFR due to daily price fluctuations..
Noted on the liquidity speeds. We already mentioned the difference in ETF price. It does fluctuate, but it has been negligible. A large fluctuation is a risk, but a low one to me. Again, after discussing this I think both are fine options. I don’t think there’s a wrong option. It just depends on the individual’s needs/preferences. The present 30-day SEC yield on USFR is 5.20%. Not bad!
User avatar
fetch5482
Posts: 1722
Joined: Fri Aug 15, 2014 4:55 pm

Re: Vanguard Federal Money Market tops 5%

Post by fetch5482 »

Soobs wrote: Mon Jun 05, 2023 5:44 pm
fetch5482 wrote: Mon Jun 05, 2023 4:07 pm
Soobs wrote: Mon Jun 05, 2023 1:57 pm
exodusNH wrote: Mon Jun 05, 2023 12:45 pm
Soobs wrote: Mon Jun 05, 2023 11:55 am

Okay so really it’s just slightly more liquid to hold the money market account due to funds being available in one vs two days? It’s my understanding the SEC sales charge is only $8 for every million dollars. Notable, but that difference really wouldn’t factor into my decision especially when assuring a full state/local tax exemption. Thanks for the info.
That fee varies. It was recently $23 per $1M, but obviously still pretty small.

It really boils down to being a bit more liquid. You've currently got a 2 day settlement before you can put in a separate transaction to get the money to your bank.
Gotcha. Sounds like at the end of the day two great options for now, but I’ll certainly be watching the SEC fee. The only other thing I could come up with is the $1 money market price vs the ETF NAV, but that NAV has been incredibly stable with only negligible shifts.
Wait, USFR is an ETF, so subject to 3-day settlement. In other words, you need 4 days for the cash to show up in your bank account, not 2. If you use VMRXX or VUSXX or another mutual fund it'll be 2 days. VMFXX (settlement fund) is next day.

Also, unlike money market funds, USFR does not maintain a $1 balance, so there is a greater risk of losing part of the principal with USFR due to daily price fluctuations..
Noted on the liquidity speeds. We already mentioned the difference in ETF price. It does fluctuate, but it has been negligible. A large fluctuation is a risk, but a low one to me. Again, after discussing this I think both are fine options. I don’t think there’s a wrong option. It just depends on the individual’s needs/preferences. The present 30-day SEC yield on USFR is 5.20%. Not bad!
Is that net of fees with ETFs? I know for MM funds the 7-day yields are always net of fees. I am not 100% sure if that is the case with ETFs as well. The ER on USFR is 0.15, which is not too bad either; but that gets is quite close to VUSXX for me.
(AGE minus 23%) Bonds | 5% REITs | Balance 80% US (75/25 TSM/SCV) + 20% International (80/20 Developed/Emerging)
MrJedi
Posts: 3540
Joined: Wed May 06, 2020 11:42 am

Re: Vanguard Federal Money Market tops 5%

Post by MrJedi »

ETFs settle in 2 days. Some brokers like Fidelity will do same day ACH. They also do free wires. I could sell ETF on Monday, money settles Wednesday morning. Then get a same day ACH or wire to the bank on Wednesday and walk out with cash on Wednesday. Or I can do ATM withdrawal directly from Fidelity on Wednesday. SEC yield is always net of fees, including for ETFs.
Soobs
Posts: 71
Joined: Sun Nov 01, 2020 10:38 pm

Re: Vanguard Federal Money Market tops 5%

Post by Soobs »

fetch5482 wrote: Mon Jun 05, 2023 6:42 pm
Soobs wrote: Mon Jun 05, 2023 5:44 pm
fetch5482 wrote: Mon Jun 05, 2023 4:07 pm
Soobs wrote: Mon Jun 05, 2023 1:57 pm
exodusNH wrote: Mon Jun 05, 2023 12:45 pm

That fee varies. It was recently $23 per $1M, but obviously still pretty small.

It really boils down to being a bit more liquid. You've currently got a 2 day settlement before you can put in a separate transaction to get the money to your bank.
Gotcha. Sounds like at the end of the day two great options for now, but I’ll certainly be watching the SEC fee. The only other thing I could come up with is the $1 money market price vs the ETF NAV, but that NAV has been incredibly stable with only negligible shifts.
Wait, USFR is an ETF, so subject to 3-day settlement. In other words, you need 4 days for the cash to show up in your bank account, not 2. If you use VMRXX or VUSXX or another mutual fund it'll be 2 days. VMFXX (settlement fund) is next day.

Also, unlike money market funds, USFR does not maintain a $1 balance, so there is a greater risk of losing part of the principal with USFR due to daily price fluctuations..
Noted on the liquidity speeds. We already mentioned the difference in ETF price. It does fluctuate, but it has been negligible. A large fluctuation is a risk, but a low one to me. Again, after discussing this I think both are fine options. I don’t think there’s a wrong option. It just depends on the individual’s needs/preferences. The present 30-day SEC yield on USFR is 5.20%. Not bad!
Is that net of fees with ETFs? I know for MM funds the 7-day yields are always net of fees. I am not 100% sure if that is the case with ETFs as well. The ER on USFR is 0.15, which is not too bad either; but that gets is quite close to VUSXX for me.
Yep, 5.2% net of fees. The difference vs. VUSXX is the tax-equivalent yield which will vary based on income and state. USFR is completely exempt from state/local taxes, but VUSXX is not at the moment. Stressing that “at the moment” part. I suspect it will be again in time.
Lyrrad
Posts: 928
Joined: Sun Jul 27, 2008 10:59 am

Re: Vanguard Federal Money Market tops 5%

Post by Lyrrad »

Soobs wrote: Mon Jun 05, 2023 1:57 pm Gotcha. Sounds like at the end of the day two great options for now, but I’ll certainly be watching the SEC fee. The only other thing I could come up with is the $1 money market price vs the ETF NAV, but that NAV has been incredibly stable with only negligible shifts.
Note that ETF/Stock settlement is expected to move to T+1 in May 2024.

I've been been using FDLXX (90%+ USGO) and FZDXX at Fidelity, since their MM funds can be automatically sold to cover debits.

I also keep some funds at Merrill Edge, with TTTXX (90%+ USGO) having same day settlement if sold before 1:45PM ET, or TFDXX before 5PM ET.

I sometimes hold T-Bills directly, buying at auction or the secondary market.

I'm keeping an eye on BOXX, since I assume they're trying to avoid any distributions, so all the appreciation could be taxed as capital gains. Haven't pulled the trigger yet, since I'm less certain about its tax implications and it has a short history.
Post Reply