Putting Vanguard funds into Money Market (VMRXX)

[Youngblood]

Has anyone on this site that uses Vanguard put their funds into money market fund VMRXX or anything similar to it to minimize risk in a volatile market? Also, would transferring my funds to this fund at the age of 44 cause any tax issues?

I have never tried to time the market before and I normally just ride out the waves with the good and the bad. With that said, I would like to explore the possibilities of protecting all or some of my portfolio for the short term (3-4 months). I have a Roth IRA (13.5% of portfolio), 401K (84.5% of portfolio) and taxable (2%) funds in Vanguard. So if I decided to do this (still a big if), would it make more sense to just use my taxable account, or in theory just move all my funds to a money market or something even more safe in vanguard?

I understand the impact on missing out on any growth as a risk, but are there any other risks that I should consider?

 

[RunningBum]

Anything that happens inside of an IRA or 401K doesn't matter, except in cases of wash sales. Selling/exchanging a fund in taxable is a taxable event. I don't try to time the market, but if I did, I would avoid doing it in taxable if I had to pay much in taxes. But limiting it to 2% sounds reasonable.

 

[PaunchyPirate]

I have used Vanguard’s VMFXX Money Market fund in the past to hold funds. So, yes to answer the OPs question. I don’t currently, as I moved those funds to an Ally Bank savings account to earn a little more interest. But I’ve had as high as $150,000 in the money market fund.

In a taxable account, there would be a taxable event if you had capital gains if you sold something with a profit to buy the money market fund. Afterwards, you will have to pay taxes on the monthly dividends from the money market fund. The are not paying much each month, but it is still taxable.

In a 401k or IRA there isn’t a tax event until you withdraw something. Roth has no tax implications.

 

[Spanky]

I have 20% of the portfolio in VMSXX and VMFXX.

 

[iloveyoga]

I keep approximately 15% of my IRA in VMRXX. This is our emergency fund type money as well as cash reserves. I like to keep it simple.

 

[SnowballCamper]

Don’t do it! You have to pick the right time to get back in the market too. What is your asset allocation that you wrote down in a personal investment strategy statement? If you don’t have one, now is a good time... (so, yeah, I didn’t answer your question, and there could be legitimate life events to trigger a need for less volatility, but “I’m worried now” isn’t one of them in my book). Good luck!

 

[Badger]

We have our tIRAs in Vanguard that consists of Wellington/Wellesley and MM. I also have a few individual stocks, and cash. I am also quite a bit older with a larger nest egg in taxable accounts that I won't be using. Each year I have my RMD placed into a MM account since I don't require the money for living expenses and I am not in an accumulation mode any more. I also have the dividends from the tIRA swept into a MM account that is used for RMD instead of used to buy more shares or selling shares for RMD.
But this is what works for me in my financial situation and NOT a recommendation for yours.
IF you decide to move money into a MM account then I would keep it within the tIRA since this money can be moved around easily and as often as you like with no penalty. I understand being nervous at this time. Just be careful if you are trying to time the market. Don't trade your cow for a handful of beans.



Cheers!

 

[Youngblood]

Thank you for the replies. As some of you mentioned, maybe keeping a small amount (emergency fund) in a MM would be more prudent. A lot to think about and research.