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Help with short term cash at Vanguard
Old 05-21-2021, 05:29 AM   #1
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Help with short term cash at Vanguard

Yesterday I sold a significant amount of stock at Vanguard. I am parking the money for 1 - 12 months for the possible purchase of a second home. Currently the money is sitting in VBIRX, Vanguard Short Term Bond Index, 30 day yield .43%.

Is there a better, higher yielding, option available at Vanguard? It should be a low risk fund suitable for parking funds that will be used in the near future. Since it may only be there for a few months, I really don't want to go outside the Vanguard platform*. Any suggestions?

Thanks,

FN

*Edit to add, the sale was inside IRAs. This was done to avoid the tax hit until/if we decide to purchase.
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Old 05-21-2021, 07:09 AM   #2
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Since it is money needed in a year or less, I would match the duration to VUSFX which has a SEC yield of .43 and a duration of 1 year. Less damage if rates rise in a year.

Good luck to you,

VW
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Old 05-21-2021, 07:49 AM   #3
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Higher yield = higher risk = higher chance you have less money when needed.

Short term bond funds can fluctuate with interest rate movement.

Federal or Prime Money Market or Treasury MM will guarantee the money is there, but lower rate. Lower yield = lower risk, etc etc.
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Old 05-21-2021, 07:55 AM   #4
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Look at the ultra short bond funds, much more stable share price.
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Old 05-21-2021, 07:56 AM   #5
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Originally Posted by VanWinkle View Post
VUSFX which has a SEC yield of .43 and a duration of 1 year. Less damage if rates rise in a year.
I understand OP wants to keep the money in Vanguard, but why buy a fund yielding 0.43 that could suffer a bit if rates rise when you could move the money to an online money market like Ally which is paying 0.50 and if rates rise, that rate could rise also? It's very simple to transfer funds back and forth, and you're going to be pulling the money out when you buy the home anyway. With rates as low as they are, you may as well squeeze out every dollar of interest you can.
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Old 05-22-2021, 09:27 AM   #6
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Originally Posted by disneysteve View Post
I understand OP wants to keep the money in Vanguard, but why buy a fund yielding 0.43 that could suffer a bit if rates rise when you could move the money to an online money market like Ally which is paying 0.50 and if rates rise, that rate could rise also? It's very simple to transfer funds back and forth, and you're going to be pulling the money out when you buy the home anyway. With rates as low as they are, you may as well squeeze out every dollar of interest you can.
OP would need to open an IRA at Ally to do that.
It's been a while since I had an Ally account so I'm not immediately sure if they do IRAs...
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Old 05-22-2021, 10:59 AM   #7
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I understand OP wants to keep the money in Vanguard, but why buy a fund yielding 0.43 that could suffer a bit if rates rise...

VUSFX has only changed like 1/2 % in the last two years.
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Old 05-22-2021, 11:01 AM   #8
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OP would need to open an IRA at Ally to do that.
It's been a while since I had an Ally account so I'm not immediately sure if they do IRAs...
The IRA detail was added later. That would make it a little harder and keeping it in house would be simpler for sure.
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Old 05-22-2021, 11:12 AM   #9
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Originally Posted by flintnational View Post
... I am parking the money for 1 - 12 months for the possible purchase of a second home. ...
We're in almost the same situation except we closed on the lot last Monday and will be building aka writing checks over the next 12 months. I just put our cash in Vanguard Ultra-Short-Term Bond Fund/VUBFX. To me, chasing yield and consequent increasing risk for money that will be there such a very short time is just not worth the effort. Obviously, YMMV.
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Old 05-22-2021, 12:20 PM   #10
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Thanks all for your responses. Now if we can just find something to buy. We put a bid in on a condo on the gulf coast last weekend. We came in 4th! Hopefully the market will slow down this fall.
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Old 05-22-2021, 12:27 PM   #11
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The IRA detail was added later. That would make it a little harder and keeping it in house would be simpler for sure.
Correct. I edited the post to add the IRA twist. That is the reason I do not want to move from Vanguard. The plan is actually a little more complicated. I sold in the IRA to raise cash and avoid a tax event. We are not sure if we will be able to locate a property at a "reasonable price". If not I can just re-buy in the IRA without any tax consequences. If we do find a home to buy, the plan is to sell stocks in a taxable account, pay CG tax, and re-buy stocks in the IRA.
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Old 05-22-2021, 12:55 PM   #12
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Thanks all for your responses. Now if we can just find something to buy. We put a bid in on a condo on the gulf coast last weekend. We came in 4th! Hopefully the market will slow down this fall.
Negotiating 101: He who is in a hurry loses.

The longer you wait the more market understanding you will gain and the higher likelihood that you will make a good buy. In a year or two or three you will not remember the time spent in the pursuit, but if you make a mistake you will remember it forever.

Good luck.
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Old 05-22-2021, 02:07 PM   #13
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Negotiating 101: He who is in a hurry loses.

The longer you wait the more market understanding you will gain and the higher likelihood that you will make a good buy. In a year or two or three you will not remember the time spent in the pursuit, but if you make a mistake you will remember it forever.

Good luck.
I have already moved to the rationalization stage, "I am selling relatively expensive stocks to buy relatively expensive real estate." Folly cannot be far in the future!
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Old 05-23-2021, 05:49 AM   #14
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I have already moved to the rationalization stage, "I am selling relatively expensive stocks to buy relatively expensive real estate." Folly cannot be far in the future!
No. Folly was no-doc loans. We know where that led. You're nowhere NEAR folly having a good chunk of change primed and ready to go. I'm sure you've already figured how much your tax bill will be if you do get to pull the trigger on a new home - and you're ready to pay the IRS its due. Heh, heh, folly would be running afoul of the feds. YMMV
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