Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-21-2006, 10:13 PM   #1
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Houston
Posts: 1,435
Comparing yield between Vanguard MMF and Emigrant Direct?

A simple question, but which is the better place for my spare cash?

1) Vanguard's Prime MMF advertises a yield of 5.08% which is "7 day average income yield net of expenses". However, this rate fluctuates throughout the month, and I'm not sure if I need to annualize this rate to reflect compounding (daily? weekly? monthly?).

2) Emigrant Direct offers an interest rate of 4.93% which is a 5.05% APY, it looks like that's daily compounding.
__________________

__________________
soupcxan is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-21-2006, 10:19 PM   #2
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,102
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

Unless your "spare cash" is 100k or more, there isn't enough difference to worry about. I'd go with whichever is more convenient.

__________________

__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-21-2006, 10:37 PM   #3
Full time employment: Posting here.
Patrick's Avatar
 
Join Date: Mar 2005
Location: Northern, Florida
Posts: 925
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

Eloan @ 5.5%. www.eloan.com
__________________
Retired in 2006 at age 49.

"Who among us is smart enough to learn from the mistakes of others?" - Voltaire
Patrick is offline   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-22-2006, 11:35 AM   #4
Thinks s/he gets paid by the post
 
Join Date: Apr 2006
Posts: 1,487
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

to compare rate you need to convert the VMMP 7-day yield to an APY.
=(1+5.08/365)^365 -1= 5.21%
__________________
d is offline   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-22-2006, 03:26 PM   #5
Full time employment: Posting here.
bosco's Avatar
 
Join Date: Jul 2005
Posts: 987
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

Quote:
Originally Posted by d
to compare rate you need to convert the VMMP 7-day yield to an APY.
=(1+5.08/365)^365 -1= 5.21%
lest you try this at home and get 154% yield, the correct formula is

=(1+.0508/365)^365-1 = 5.21%
__________________
I have an inferiority complex, but it's not a very good one.
bosco is offline   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-22-2006, 03:51 PM   #6
Thinks s/he gets paid by the post
 
Join Date: Apr 2006
Posts: 1,487
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

Quote:
lest you try this at home
woops!
__________________
d is offline   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-22-2006, 04:02 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
HFWR's Avatar
 
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 12,964
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

Not to nitpick, but shouldn't it be:

=((1+.0508/365)^365)-1 = 5.21%
__________________
Have Funds, Will Retire

...not doing anything of true substance...
HFWR is online now   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-22-2006, 04:15 PM   #8
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 4,005
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

Quote:
Originally Posted by HFWR
Not to nitpick, but shouldn't it be:

=((1+.0508/365)^365)-1 = 5.21%
Not to nitpick ( ), but your added set of parenthesis are not needed if you follow the standard order of operations (parenthesis, exponents, multiplication, division, addition, then subtraction).
__________________
justin is offline   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-22-2006, 05:00 PM   #9
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

Quote:
Originally Posted by justin
Not to nitpick ( ), but your added set of parenthesis are not needed if you follow the standard order of operations (parenthesis, exponents, multiplication, division, addition, then subtraction).
That reminds me of the one thing I remember from 8th grade math:

Please
Excuse
My
Dear
Aunt
Sally
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-22-2006, 05:30 PM   #10
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 4,005
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

PEMDAS - best thing learned in 4th grade fer sure.
__________________
justin is offline   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-22-2006, 06:20 PM   #11
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

Quote:
Originally Posted by justin
PEMDAS - best thing learned in 4th grade fer sure.
You learned that in 4th grade? You must have gone to school with JG in the advanced section.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-22-2006, 07:12 PM   #12
Full time employment: Posting here.
 
Join Date: Sep 2006
Posts: 608
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

Quote:
Originally Posted by HFWR
Not to nitpick, but shouldn't it be:

=((1+.0508/365)^365)-1 = 5.21%
Not to nitpick, but this formula is accurate only for DAILY compounding.
I'm not sure if this is how it's done, or not. Doesn't really matter though.

If you generalize the formula as (1+APR/N)^N - 1, where N is the number
of compounding periods in a year, you'll find that for N=12 (monthly
compounding) 5% -> 5.116%, and for N=365 (daily compounding)
5% -> 5.127%. In fact, you can imagine the limit, as N goes to infinity,
of this expression; I'm a little rusty on how to compute the limit, but
you could approximate it with N=1,000,000, and it's still 5.127%
(you have to go out more decimal places to see the difference).

Even rolling 3-month T'Bills gives you 5.095%; in other words, N=4
gets you 3/4'ths of the way from APR to inifinitely compounded APY
(hope I'm using APR and APY correctly, but you know what I mean).



__________________
JohnEyles is offline   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-22-2006, 07:33 PM   #13
Recycles dryer sheets
 
Join Date: Feb 2005
Posts: 454
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

ED has FDIC insurance, which should be worth something. There's a 1% chance per year, of a hundred year flood.

(I'm thinking of a financial "flood" that hurts money markets, but doesn't quite drown the U.S. government)
__________________
lazyday is offline   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-22-2006, 08:37 PM   #14
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,315
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

Quote:
Originally Posted by JohnEyles
In fact, you can imagine the limit, as N goes to infinity,
of this expression; I'm a little rusty on how to compute the limit, but
you could approximate it with N=1,000,000, and it's still 5.127%
Let A = (1 + R/N)^N = value of $1 in a year

Ln A = N Ln (1 + R/N) where Ln is the natural log

as N goes to infinity, Ln (1 + R/N) ~ R/N

Ln A ~ N x (R/N) = R

therefore A = e^R

if R = 0.05 , A = e^0.05 = 1.05127 so the continuously compounded APR = 5.127%
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-22-2006, 09:14 PM   #15
Thinks s/he gets paid by the post
saluki9's Avatar
 
Join Date: Feb 2005
Posts: 2,032
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

Thanks Fire'd I thought I was going to have to go through the whole natural log thing

__________________
saluki9 is offline   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-22-2006, 09:41 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
HFWR's Avatar
 
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 12,964
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

Quote:
Originally Posted by HFWR
Not to nitpick, but shouldn't it be:

=((1+.0508/365)^365)-1 = 5.21%
Well, you do have to enter it into a calculator this way...

__________________
Have Funds, Will Retire

...not doing anything of true substance...
HFWR is online now   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-22-2006, 09:45 PM   #17
Recycles dryer sheets
 
Join Date: Dec 2005
Posts: 388
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

This whole string reminds me of why I put my funds somewhere and forget them. I can do the equations, but don't want to.

setab
__________________
I told you I'd taunt you a second time.
setab is offline   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-22-2006, 10:10 PM   #18
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 4,005
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

Quote:
Originally Posted by HFWR
Well, you do have to enter it into a calculator this way...
What kind of calculator? My TI graphing calculator and excel formulas don't require the second set of parenthesis. They both use the standard order of operations (PEMDAS).
__________________
justin is offline   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-22-2006, 10:15 PM   #19
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 4,005
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

Quote:
Originally Posted by retire@40
You learned that in 4th grade? You must have gone to school with JG in the advanced section.
I didn't think PEMDAS order of operations was that advanced? It is required to evaluate simple mathematical expressions. 4th grade math from what I recall. Certainly by 6th grade pre-algebra it would be taught, right?

Of course, I was one of those guys that finished all of my calculus and diff eq for my engineering degree during high school. 8)
__________________
justin is offline   Reply With Quote
Re: Comparing yield between Vanguard MMF and Emigrant Direct?
Old 11-22-2006, 10:17 PM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
HFWR's Avatar
 
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 12,964
Re: Comparing yield between Vanguard MMF and Emigrant Direct?

I went to college before graphing calculators...
__________________

__________________
Have Funds, Will Retire

...not doing anything of true substance...
HFWR is online now   Reply With Quote
Reply

Tags
vanguard


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 01:09 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.