Money Market Alternatives

[Midpack]

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...

 

[W2R]

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.

 

[sailor]

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.

 

[FIREd]

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?

 

[dgoldenz]

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.

 

[Onward]

I keep short-term cash in VBISX.

 

[LOL!]

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

 

[Sue J]

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%.

 

[Alan]

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.

 

[veremchuka]

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.

 

[chinaco]

Does your 401k have a stable value fund?

 

[Midpack]

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.

 

[Gotadimple]

American Express Bank is offering 1.3% for high yield savings. No minimum balance. Rated 3.5 stars by Bauer Financial.

 

[BTravlin]

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.

 

[Texas Proud]

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...

 

[jebmke]

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.

 

[chinaco]

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.

 

[ikubak]

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.

 

[chemist]

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.

 

[foxfirev5]

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.

 

[braumeister]

I'm getting 1.3% in my Discover Bank savings account. I belong to AAII, and opened the account through them.
If you're an AAII member, go to https://aaii.discoverbank.com or call 800-338-1302 for the info.

 

[TromboneAl]

Thanks, Midpack, I haven't looked at the MM yield lately.

With my low tolerance for added complexity, I'm more likely to want to stay within Vanguard.

VBISX: Riskier, but average return of 4% over the last 10 years.

Online Saving: Return of 1-2% with no risk, but extra "paperwork," and possible need to call a company and "press 1 for English, etc."

Here's a comparison of VMMXX (Prime MM) and VBISX (Short Term Bond).

10 years:



1 year:

 

[Midpack]

I'm not an MD, but doesn't the yellow line mean the patient has died [flat-lined]?

 

[Dennis]

Savings places

I found instead of MMKt...to get Ck writting and transfering $ In /out.. > VSGBX.
yr' Fund TotRtn
08'> VSGBX 7%
09' > VSGBX 3%
10'> VSGBX YTD + 3.14% ( 1.59% yld)

In bear yrs ( 00-02' & 08' ) I split it btwn VSGBX & VFISX

From Vanguard about VSGBX.:

The Vanguard Short Term Federal Fund Investor Shares (VSGBX) will have a
fluctuating share price, unlike a money market fund, but it does still have
the capability of electronic bank transfers and checkwriting. You can
access the fund's prospectus online by going to the Forms section of our
website. From there you will see a link that says Get prospectuses &
reports and you can print it from there.


Also ck out Paul Merriman's FundAdvice.com - Home
He comes up with good places

hope that helps someone

 

[BigMoneyJim]

Doesn't using VBISX, VSGBX or VFSTX complicate tax tracking?

I went with PenFed CDs for reasonable return with minimal hassle. It's painful to see the renewal rates, especially after I was saddened when I bought a 5% APY CD shortly after 6% APY CDs were available, but those are the ones now expiring, and I would love to have 5% back.

But when I start to look around for better rates I remind myself that the primary goal for my emergency funds were to not lose value, to be immediately available and to be a minimum of hassle to maintain. Penfed CDs still win for me.

On a side note, I set up a "money market savings" account at Penfed to hold pre-buy funds and CD maturity funds because the yield was better than than the regular savings. But now the MM savings yield is lower. Go figure. Rate chasing within an institution if I want to.