Vanguard 529 short term reserves fund

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Topic Author
intendi
Posts: 135
Joined: Sat Oct 17, 2020 10:16 am

Vanguard 529 short term reserves fund

Post by intendi »

Regarding the Vanguard Target Enrollment funds:

I'm curious if anyone has insight into why Vanguard uses Nevada Short Term Reserves Fund for the 529 plans instead of a typical money market fund? The Nevada Short Term Reserves fund* seems to be a stable value fund of sorts and is a bit of a stinker (current 30 day SEC yield is 1.81%). It makes up an increasingly large portion of the portfolio, ultimately reaching 60% at commencement.

*Through investments in Vanguard Short-Term Reserves Account, the Portfolios indirectly invest in funding agreements issued by one
or more insurance companies, synthetic investment contracts (SICs), and shares of Vanguard Federal Money Market Fund. Funding
agreements and SICs are interest-bearing contracts that are structured to preserve principal and accumulate interest earnings over the
life of the investment. Funding agreements generally pay interest at a fixed interest rate and have fixed maturity dates that normally
range from 2 to 5 years. SICs pay a variable interest rate and have an average duration range between 2 and 5 years. The Federal
Money Market Fund invests primarily in high-quality, short-term money market instruments issued by the U.S. government and its
agencies and instrumentalities.


References:
https://personal.vanguard.com/pdf/529pr ... omain=true
https://investor.vanguard.com/accounts- ... omposition
User avatar
Eagle33
Posts: 2181
Joined: Wed Aug 30, 2017 3:20 pm

Re: Vanguard 529 short term reserves fund

Post by Eagle33 »

Probably because the state of Nevada is the sponsor of the Vanguard 529 plan.
Topic Author
intendi
Posts: 135
Joined: Sat Oct 17, 2020 10:16 am

Re: Vanguard 529 short term reserves fund

Post by intendi »

Actionable update:

I'm planning on switching from the target enrollment fund (in my case 2024/2025) to the conservative growth fund (fixed 25% stocks 75% bonds) and setting aside some extra cash to fund college in a higher yielding instrument outside of the 529. While I agree with the target enrollment de-risking philosophy, that Nevada short term reserves fund isn't an ideal form of cash. Seem reasonable?

I perused a few other age based plans out there and the Fidelity New Hampshire offering was a bit more to my liking in terms of short term reserves. Switching isn't in the cards though (requires being out of the market) and isn't worth it in my opinion.
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