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Vanguard Prime Money Market Fund?
Old 05-01-2008, 01:28 PM   #1
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Vanguard Prime Money Market Fund?

I see that the Vanguard Prime money market fund is now yielding a whopping 2.41%. The Vanguard tax-exempt money market fund is yielding 2.51%.

Any reason not to shift the money over to the tax-free money market?

Or better yet, where are any of you parking cash for a better "safe" yield?

The plan is to invest 300k in the 5% managed payout fund over the next year, but it would sure be nice to make some decent $ - without taking significant principal risk - while just sitting...

Thanks...
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Old 05-01-2008, 02:52 PM   #2
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How about ING Electric Orange: High Yield Checking Account from ING DIRECT

Currently yielding 3.4% APY. You would need to create more then one account to keep FDIC insured.

The reality there is no "safe" high yielding choice in todays interest rate climate.

DD
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Old 05-01-2008, 05:31 PM   #3
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That tax exempt rate may just be a temporary thing. I remember a couple of years ago the tax exempt had a higher rate than the prime and it lasted all of about 3 weeks before dropping.

You're gonna laugh at me because I just shot a bunch of money into unlaunched funds, but I actually shifted a big chunk of cash OUT of the prime MM fund and into the treasury MM fund last month since the premium loss wasnt that big and I was getting a teeny bit nervous hearing about a few outfits propping up or preparing to prop up their MM funds that were based on the same sorts of underlying investments the Prime fund uses.

So on one hand ridiculously conservative...on the other...:
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Old 05-01-2008, 07:34 PM   #4
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cyclone6,

I'm leaving my current money in Vanguard Prime, but my motivation may be different than yours.

The MM funds are my emergency fund, so the money has to be readily available. If you want more yield, you can find six-month CDs with better yields.

I also have confidence that Vanguard's managers didn't and won't get sucked in to trouble reaching for higher yields. So I'm content to stick with my overall plan.
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Old 05-01-2008, 08:45 PM   #5
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As written before, I keep my emergency fund in Vanguard GNMA in a tax-deferred account. Volatility is low, rate is 4.8%, and it's tax-deferred. I don't think it has "significant principal risk". Sure it has more risk, but its held its own in the last couple of months while even TIPs have dropped significantly.
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Old 05-01-2008, 08:51 PM   #6
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Etrade savings acct is at 3.01 that's not 5. In a moment I'm looking into LOL suggestion above for myself.
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Old 05-02-2008, 12:42 AM   #7
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Quote:
Originally Posted by LOL! View Post
As written before, I keep my emergency fund in Vanguard GNMA in a tax-deferred account. Volatility is low, rate is 4.8%, and it's tax-deferred. I don't think it has "significant principal risk". Sure it has more risk, but its held its own in the last couple of months while even TIPs have dropped significantly.
I just looked at the graphs for the past 10 years, and it looks like in May of the past two years, it dipped a little to about $10... guess with my bad luck, I'll move my money on June 1st. I just added a chunk into the VG Prime MM, so my total is at $141K... it's supposed to be some remodeling that we're doing but hasn't happened yet! <sigh>
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Old 05-02-2008, 02:50 AM   #8
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Between the low interest rate and the weakening $... you are losing money in a MM account.
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Old 05-02-2008, 07:50 AM   #9
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Rates on money market accounts always tend to spike towards the end of the month. However, depending on your marginal tax rate, the tax-exempt MMF may still be a better deal than the prime MMF, as they have been pretty close to each other in nominal terms for a while.
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