Vanguard Money Mkt Acts

[modhatter]

I wanted to open a money market account with Vanguard and need to park about $150,000 for some time (couple of years) I called them and they have four different ones. The highest paying one is paying 5.09% now which is the Prime, but she noted that the Treasury Money Mkt was the most secure, which is only paying 4.49%.

I know I can open a CD for one year at a little better than 5%, that at least won't go down in yield for a year, as the Prime MMkt account probably will.

First of all is Vanguard's Prime Money Mkt. a safe enough bet? I kind of wanted to have funds there to facilitate buying something in the future, so I am not sure which way to go now. Any insight would be appreciated.

 

[brewer12345]

Prime is fine.

 

[Texas Proud]

If you know you will not need it, look for a higher paying CD... with the recent rate cut, the 5% will be dropping soon.

 

[Gumby]

What is your marginal tax bracket? If 28% or more, the Vanguard Tax Exempt Money Market Fund might be a better deal.

 

[FIREd]

It is important to note that the money market vehicles you are citing are not money market accounts, but money market funds. There is one major difference between a the two. The money you place in a money market account is FDIC insured, while money you place in a money market fund is not (though with a good money market fund the risk of losing money is infinitesimal). So if you want absolute safety, you'd better look at CDs or money market accounts. Otherwise the Vanguard funds you cited are all good, my preference being Prime. Personally I would go with CDs in your situation and lock in a good rate for the next 2 years.