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Money Market Alternatives
Old 12-17-2010, 01:51 PM   #1
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Money Market Alternatives

My "cash" holdings are all in VMMXX. I've finally gotten tired of the extremely low returns and I'm looking for alternatives. My bank has CD's, would be a real PITA, and the rates aren't much better than VMMXX.

I am comfortable with my knowledge re: stocks/funds and bond/funds but I've never had to think much about cash holdings. Are there better alternatives for cash, or an asset class between cash and bonds that I'm overlooking? Didn't see anything on the Vanguard site.

Did a search on Money Market and VMMXX and didn't find much...
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Old 12-17-2010, 01:58 PM   #2
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Mine is mostly in VMMXX, too. Other members have mentioned PenFed CD's, so that might be something worth looking into. In my case, I don't want to tie up my cash in a CD for another year or so.

Hopefully others will come up with some good suggestions. I am thinking about high yield online savings accounts, but am thinking that their interest rates might drop after I shift my money over there.
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Old 12-17-2010, 02:34 PM   #3
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maybe high yield saving accounts, like ING Direct (currently 1.1% APY) or Emigrant Direct (currently 1.0% APY)

Disclaimer: I do have some of my emergency stash @ Emigrant. No check writing privileges, ACH transfer between Emigrant and my checking account takes 2 days.
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Old 12-17-2010, 02:40 PM   #4
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Are there better alternatives for cash, or an asset class between cash and bonds that I'm overlooking? Didn't see anything on the Vanguard site.

For cash, I stick with high yield savings accounts and CDs (I want my cash to be 100% FDIC-insured). Why would CDs be a PITA?
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Old 12-17-2010, 02:50 PM   #5
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There's always fixed annuities, but the rates are pretty lousy right now. Best thing out there if you can lock up the money for 5 years is 3% guaranteed for all years. Most are 1.5-2.5% these days.
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Old 12-17-2010, 03:01 PM   #6
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I keep short-term cash in VBISX.
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Old 12-17-2010, 03:02 PM   #7
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If you need absolutely safety, you need to be in CDs and FDIC-insured accounts.

Money market funds are the next step up in risk from that. Then to go to slightly longer durations, you have short-term bond funds. Vanguard has several of these with different risk characteristics (i.e. Treasury-only to corporate-only). These short-term bond funds will lose money sometimes, however, if you are good with that, I don't see a problem.

I own Vanguard Short-term investment-grade bond fund (VFSUX) and also the Vanguard corporate short-term bond index fund (VCSH). I even bought more this week and made more than full-year's money market interest in a couple of days. See also Short Term Taxable Bonds
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Old 12-17-2010, 04:28 PM   #8
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Online Savings, Money Market, CD and IRA CD Accounts | Discover Bank

Discover Bank Online Savings Account is paying 1.25%, $500 to open, no minimum balance required. Since it's a savings account you can only do 6 preauthorized withdrawals per statement period.

It seems to operate like Emigrant Direct and ING which are only paying 1% and 1.1%.
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Old 12-17-2010, 04:42 PM   #9
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I keep short-term cash in VBISX.
+1

I also have a money savings account paying 1% at HSBC NA.

I also have I-Bonds and Penfed CD's.
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Old 12-17-2010, 04:48 PM   #10
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i think i saw 1.56% in an ally bank cd 2 days ago but i wasn't interested so i can't remember the time period.
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Old 12-17-2010, 04:59 PM   #11
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Does your 401k have a stable value fund?
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Old 12-17-2010, 05:05 PM   #12
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Does your 401k have a stable value fund?
Yes, but that's all fully invested, and those returns are awful too. I'm looking for someplace to put taxable cash.
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Old 12-17-2010, 05:43 PM   #13
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American Express Bank is offering 1.3% for high yield savings. No minimum balance. Rated 3.5 stars by Bauer Financial.
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Old 12-17-2010, 07:45 PM   #14
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Capital One Bank offers their InterestPlus Online Savings account paying 1.25% on minimum monthly balance of $1k. If you keep a minimum of $10k per month they will give you a 10% bonus on that interest on a quarterly basis. FDIC insured. And, yes, interest rate can change at anytime but it has held steady for 7 months for me so far.
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Old 12-17-2010, 09:45 PM   #15
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American Express Bank is offering 1.3% for high yield savings. No minimum balance. Rated 3.5 stars by Bauer Financial.

+1 I have been looking for my company... but most of the good rates are only for individuals... AMEX is the highest I have seen this past week...

I have ING and am happy with that... found out today that a coworker has ING for checking and uses their bill pay.... might have to check it out...


As an FYI, I did not like Capital One's bill pay... so will close it down sometime when my wife will let me... but only about $200 over there...
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Old 12-18-2010, 01:04 AM   #16
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I keep short-term cash in VBISX.
this is a good option but we use the Limited Term Tax Exempt which has about the same duration and the yield is slightly higher and exempt from federal tax.

Tax exempt yields are running above treasuries right now.

Also keep a small amount in the ST TE which has a duration of around 1.
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Old 12-18-2010, 04:48 AM   #17
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I have not seen many good returns on low risk investments.

Remember the old adage... don't fight the Fed.

IMO - it comes down to taking some risk for return.

I am trying to limit market losses and get a little retun on fixed and be patient till the Fed stops tinkering.
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Old 12-18-2010, 05:58 AM   #18
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maybe high yield saving accounts, like ING Direct (currently 1.1% APY) or Emigrant Direct (currently 1.0% APY)

Disclaimer: I do have some of my emergency stash @ Emigrant. No check writing privileges, ACH transfer between Emigrant and my checking account takes 2 days.
I do the same....ING and Emigrant Direct for cash. For a more return and risk I keep some funds in Vang Total Bond Index Admiral. For less return and risk just go shorter term on the bonds.
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Old 12-18-2010, 11:48 AM   #19
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I was getting 1% taxable at my credit union then I found out about a bank in Texas that pays 1.8% tax free with checkwriting and FDIC insurance. Only catch is it pays interest in American Airlines miles, that is how it comes to be tax free. A good deal if you can use the miles, otherwise not.

For my tax deferred accounts I have kept my 401(k) at Fido for access to the GIC which yields about 2.4%, once interest rates return to normal I will roll that over to a Vanguard IRA.
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Old 12-19-2010, 01:30 PM   #20
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There's not really an alternate at VG. I only use VMMXX for a brokerage sweep acct and let the balance run down to $1k or less. The ST Corp bond fund is only yielding 1.88% and is not worth the risk. I currently use a couple of Hi YLD savings accounts at 1.10% or so. My 401k has a stable value fund (1.97%) which is not as hot as some I've seen here. But since its all that's offered I'm putting new money into it for now.
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