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Ally to Prime Money Market fund transfer
Old 04-04-2018, 12:24 PM   #1
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Ally to Prime Money Market fund transfer

Since Ally online savings is yielding 1.45% and Vanguard Prime MMF has a yield of 1.71% (and rising), I have begun transferring much of my cash to PMMF. I am assuming that PMMF will continue to pay in excess of Ally like it used to do.

Is anyone else taking this action?
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Old 04-04-2018, 01:16 PM   #2
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I currently have most of my cash in Capital One. Current rate with no specified amount needed to open an account is 1.5%.
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Old 04-04-2018, 02:13 PM   #3
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Originally Posted by mickeyd View Post
Since Ally online savings is yielding 1.45% and Vanguard Prime MMF has a yield of 1.71% (and rising), I have begun transferring much of my cash to PMMF. I am assuming that PMMF will continue to pay in excess of Ally like it used to do.

Is anyone else taking this action?
Not yet, but have been pondering doing something similar. Maybe even cashing in the no penalty CDs at Ally at 1.6%.
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Old 04-04-2018, 02:28 PM   #4
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Most folks probably know this but, the Vanguard Prime MMF is not insured by FDIC

https://personal.vanguard.com/pub/Pdf/sp30.pdf

"An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other gover
nment agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time."
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Old 04-04-2018, 02:45 PM   #5
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Fidelity continues to annoy me with their 0.42 percent expense ratio on their settlement fund, SPAXX, and their Treasury MM Fund, FDLXX. I have to buy CD's and treasuries to avoid this. Since the bulk of the cash is future RMD's in an inherited IRA, I might consider moving the account if this keeps up.
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Old 04-04-2018, 02:49 PM   #6
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Originally Posted by Sunset View Post
Most folks probably know this but, the Vanguard Prime MMF is not insured by FDIC

https://personal.vanguard.com/pub/Pdf/sp30.pdf

"An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other gover
nment agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time."
I'm not too worried about that, a money market fund is not a bank. Banks are insured because they can become insolvent, rather easily. Your deposits were loaned to a neighbor for his house.



Money market funds are 100% in liquid securities. Sure they could break the buck, but nothing like what depositors went through in the depression or the S&L crisis.
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Old 04-04-2018, 03:06 PM   #7
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I'm in the same boat. I'm sitting on a bunch of cash in Ally getting 1.45% I see other Internet banks continue to up their savings rate to as much as 2%, and Ally won't budge.
I have stared moving it out of Ally to my Fidelity account to buy CD's. I will look into Vanguard
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Old 04-04-2018, 03:15 PM   #8
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I'm not too worried about that, a money market fund is not a bank. Banks are insured because they can become insolvent, rather easily. Your deposits were loaned to a neighbor for his house.



Money market funds are 100% in liquid securities. Sure they could break the buck, but nothing like what depositors went through in the depression or the S&L crisis.
100% liquid securities are liquid...until they are not. That's the funny thing about credit crisis situations, stuff happens.

https://en.wikipedia.org/wiki/Reserve_Primary_Fund

All America Bank/ RedNeck is paying 1.75% (FDIC insured), up to 50K (each): https://www.allamerica.bank/

Popular Direct, 2.00% (FDIC Insured), $5K min:
https://www.populardirect.com/

and some more, see: https://www.depositaccounts.com/blog...counts-survey/
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Old 04-04-2018, 04:06 PM   #9
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I'm in the same boat. I'm sitting on a bunch of cash in Ally getting 1.45% I see other Internet banks continue to up their savings rate to as much as 2%, and Ally won't budge.
I have stared moving it out of Ally to my Fidelity account to buy CD's. I will look into Vanguard
I use Discover and Synchrony online banks but over the past month I've been moving cash to Fidelity and buying mostly 3 month T-Bills, rate currently 1.7+%.

I have retirement accounts at Vanguard and have moved uncommitted funds from settlement accounts to Prime MM and, as market drops, average into VTI (total market index ETF). Not much in cash equivalent at Vanguard though as I only use settlement account to collect dividends.
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Old 04-04-2018, 04:11 PM   #10
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100% liquid securities are liquid...until they are not. That's the funny thing about credit crisis situations, stuff happens.

https://en.wikipedia.org/wiki/Reserve_Primary_Fund
Yes, that is the one example of a MM breaking the buck - investors were returned 99.1 cents per dollar invested. Totally different than ~1000 S&Ls and a lot of banks failing in the S&L crisis, or hundreds (including megabanks) failing in the last financial crisis.

Calculated Risk: Bank Failures by Year

Banks need to be insured or no one would put any money in them.
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Old 04-04-2018, 07:46 PM   #11
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Yes, I'm doing similar.

Just cashed out my no penalty CDs and most of the Savings at Ally to re activate my Treasury Direct account after 7 years, buying Bills, 3-6-12 mos. (current rates below).

https://www.treasury.gov/resource-ce...data=billrates
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Old 04-04-2018, 08:00 PM   #12
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I currently have most of my cash in Capital One. Current rate with no specified amount needed to open an account is 1.5%.
I'm with you. 1.5% FDIC insured for CASH is acceptable. I'm not going to run around to catch 21 basis points.

That said, I have started to buy 2-yr brokered CD's (2.55% right now) in my IRA, with int/div/cap gains distributions.

Not afraid of the market, just part of my AA strategy.
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Old 04-05-2018, 10:33 AM   #13
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Yes, that is the one example of a MM breaking the buck - investors were returned 99.1 cents per dollar invested. Totally different than ~1000 S&Ls and a lot of banks failing in the S&L crisis, or hundreds (including megabanks) failing in the last financial crisis.

Calculated Risk: Bank Failures by Year

Banks need to be insured or no one would put any money in them.
But the fact is they are insured: IF a Frog had wings, it wouldn't bump its *** when it hopped.
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Old 04-05-2018, 01:54 PM   #14
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Fidelity continues to annoy me with their 0.42 percent expense ratio

Yikes! I thought that PMMF was high @ .16%ER.
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Old 04-05-2018, 05:09 PM   #15
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I give them a little while to catch up, then I start moving funds - but probably just to other FDIC insured or treasury vehicles.

If the savings accounts stay behind too much longer I’ll start buying T-bills.
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Old 04-05-2018, 05:13 PM   #16
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Fidelity continues to annoy me with their 0.42 percent expense ratio on their settlement fund, SPAXX, and their Treasury MM Fund, FDLXX. I have to buy CD's and treasuries to avoid this. Since the bulk of the cash is future RMD's in an inherited IRA, I might consider moving the account if this keeps up.
Well, the stated yield is after that expense ratio. So you can simply compare current yields. But if you don’t like it move your funds elsewhere.
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Old 04-05-2018, 06:45 PM   #17
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We aren't moving money yet, so I'm just butting in here to ask if the lack of FDIC backing is a big deal, all things considered.

If one has, say, $600,000 in mutual funds and $100,000 in the prime money market, is there actually a difference in risk?

The Nervous Nellie in me would like the FDIC/NCUA backing but the Calm Carrie in me says it's just fine to use the uninsured account since our other money isn't backed (apart from the small amount in our local credit union).

Should I be like Nellie or Carrie?
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Old 04-05-2018, 07:34 PM   #18
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We aren't moving money yet, so I'm just butting in here to ask if the lack of FDIC backing is a big deal, all things considered.

If one has, say, $600,000 in mutual funds and $100,000 in the prime money market, is there actually a difference in risk?

The Nervous Nellie in me would like the FDIC/NCUA backing but the Calm Carrie in me says it's just fine to use the uninsured account since our other money isn't backed (apart from the small amount in our local credit union).

Should I be like Nellie or Carrie?
I think it’s just something to take into account when comparing money market funds to FDIC insured CDs and savings accounts. The money market funds should be paying a higher interest rate/yield to compensate for their slightly higher risk. If they are not, you have to question using them. Perhaps it’s worth the convenience. Or not. Up to the investor.

Back before 2010 it seemed like money market funds were paying quite a bit more, but that really changed after 2010.

And for the last several years they have been paying almost nothing, while high yield savings accounts have paid way more.
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Old 04-05-2018, 10:15 PM   #19
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Well, the stated yield is after that expense ratio. So you can simply compare current yields. But if you donít like it move your funds elsewhere.
Correct. And the yields are in the 1.2's. Treasuries themselves are substantially higher than the corresponding treasury money market funds at Fidelity. That's more work to squeeze out a few dollars of yield. Vanguard's federal money market fund pays 1.54 percent compound yield with a 0.11 expense ratio. I'm not moving the money to Vanguard, I'm hoping Fidelity will get some heat about the expenses and reduce them to something competitive.
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