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VMRXX is the old VG Prime M-Mkt. When 2014/16 m-mkt reforms happened, VG tried to get an exception because VMRXX was in retail-prime category. When exception wasn't allowed, its name was changed to VG Cash Reserves Federal & adjusted objectives. VG already had Federal VMFXX. These 2 funds could be merged but VG kept both - VMFXX as core/settlement & VMRXX with 1 bps lower.
@yogibearbull as far back as I remember, the yield on VMRXX has been 1 basis point higher than VMFXX. Is one money market fund safer than the other?
@Mona, both being "government" m-mkt funds are equally safe - but VG has to put boilerplate language about all m-mkt losing money. Neither has gates and/or redemption fee.
VG doesn't link m-mkt funds (like Fido), so, if you are in VMRXX, you would have to manually shift money between it and core/settlement VMFXX.
But if this headache is fine for you, go with VMRXX. 1 bps difference on $1 million is $100 difference over a year.
For more safety (backed by full faith and credit of Treasury), VUSXX has a gross yield that's a basis point lower. Repos (used by the other funds) are overcollateralized with government securities but are not directly backed by the government.
The role of MMFs as cash investors in repos has increased over the last 20 years. One reason for the increase is the growth of assets under management in government MMFs, which are required to invest at least 99.5% of their assets in cash, U.S. government securities, or repos collateralized by cash and government securities.
I don't know much about the Vanguard Brokerage, except for what I read. I know it traditionally is such a low fee brokerage, that you get some benefits for more of a "passive" based approach to investing, especially buy and hold long term investing. I don't find its MMkt funds, as a "compelling" reason to choose Vanguard brokerage, compared to Fidelity or Schwab, both of which I have actually used. My experience with Fidelity MMkt funds, was actually better than my experience with Schwab, but overall I prefer Schwab because of its wide array of other investing options, the availability of large array of institutional class of mutual funds, and a large array of fixed income options, its Research tools to select funds, its customer service, and the availability of local brokerage offices. Depending on what you value the most about a Brokerage, you could make an argument for any of these 3 major brokerages, but I would never value the availability of VMRXX or VMFXX or VUSXX as significant reason for me to choose Vanguard as my preferred Brokerage choice. I use SWVXX and SNAXX primarily for my MMkt choices, but it offers a wide array of other MMkt funds that are good choices for a variety of reasons. My major reason from switching from Fidelity to Schwab, was the availability of a large array of Institutional class mutual funds and a Schwab office close to where I live. I don't use the Schwab office much at all, but it is very convenient for my wife, who prefers fixed income options and a local office which could help her, if she outlives me.
Geographic proximity will vary from person to person. There's a Schwab office just a five minute walk away from me. (The walk to Fidelity is about an hour, i.e. 3 miles, but it takes me over a national landmark, with views of a national monument and a local landmark.) More important to me is that Fidelity will notarize papers for me and give me a medallion stamp on the spot while the Schwab office doesn't have a notary on staff and sends papers to its back office for medallion stamps.
I opened a Vanguard taxable account precisely for access to a MMF, specifically VUSXX. SNSXX pay ¼% less, while FDLXX with a whopping 42 basis point ER isn't even yielding 5%. Vanguard isn't and has never been my preferred brokerage, but it has offered fund products I could not match elsewhere.
Years ago I (re)opened a Schwab account because of its (then) high interest checking account that provided an ATM card with no foreign exchange fees and full rebates. As with Vanguard, that's not something that would make Schwab my preferred brokerage, but at the time it was enough to get me in the door.
What Schwab did right was reduce the mins on lots of funds (including institutional share classes). There's often a reduced min at Fidelity as well for institutional shares within IRAs, but you wouldn't know this without an account where you can make test trades. The downside at Schwab is that each purchase will cost $49.95 (or more), while Fidelity usually charges $5 when investing "automatically".
Someone pointed out to me that Schwab also has an automatic investment system for funds. But when I called Schwab on Friday to ask about this, I was told that the only funds that are eligible for auto invest are NTF funds. (Perhaps the rep was mistaken?)
When I explained that I was looking around for a VBS replacement, the rep asked for contact info so that he could send me some information. He would also have my local office contact me to provide an overview of services. I agreed and will see what I hear from them soon.
There are institutional share classes and institutional investors. Schwab has designated more funds as accessible only to institutional investors / advisory platform; some of these funds are accessible to retail at Fido but the institutional share class of these funds at Fido is very high ($1m?) compared to at Schwab. Those with access to institutional share class of all funds at Schwab, please share how the rest of us can get the same access. Also, some funds outright are available only to institutional investors at Schwab but are available to retail at Fido (E.g., QDSNX).
(Fido allows one to convert investor class to institutional when the minimum is reached if the fund allows conversion- no additional fees.)
The friction with CDs is illiquidity, early withdrawal penalties, etc . Many investors, even those that will not take any credit risk on a portion of their portfolio, pay for the psychological security of liquidity by not buying CDs even when they know the probability of them needing to tap into that portion is near zero. Perhaps, to be human is to be irrational. Having said that if you are buying a CD of any bank that has the potential to be forced by regulators/ FDIC to be taken over by another bank, the acquiring bank is allowed to change the interest rate on the CD for the remaining time period prior to maturity - generally speaking. That is not a good excuse not to buy CDs of well capitalized banks but the liquidity, convenience, etc. are good excuses in my book! Cut people some slack (psychological indulgence).
There are institutional share classes and institutional investors. Schwab has designated more funds as accessible only to institutional investors / advisory platform; some of these funds are accessible to retail at Fido but the institutional share class of these funds at Fido is very high ($1m?) compared to at Schwab
Sometimes yes, sometimes no.
AQR institutional class shares, e.g. QDSIX (an MFO Great Owl) are as you described - available only to institutions at Schwab and available for a seven figure min ($5M) at Fidelity.
Allspring (formerly Wells Fargo) institutional class shares, e.g. WFMIX (another MFO Great Owl) are available only to institutions at Schwab but open to retail investors at Fidelity. In an IRA (and only in an IRA), Fidelity sets no min. One could buy $50 worth for $99.95 including TF.
a CD of any bank that has the potential to be forced by regulators/ FDIC to be taken over by another bank, the acquiring bank is allowed to change the interest rate on the CD for the remaining time period prior to maturity - generally speaking.
Yes, but. There is an out. If the rate is changed, the saver is allowed to get out without penalty. The risk is in having one's long term rate lock broken. A saver does not face an unexpected liquidity risk; in a sense just the opposite.
There are institutional share classes and institutional investors. Schwab has designated more funds as accessible only to institutional investors / advisory platform; some of these funds are accessible to retail at Fido but the institutional share class of these funds at Fido is very high ($1m?) compared to at Schwab
Sometimes yes, sometimes no.
AQR institutional class shares, e.g. QDSIX (an MFO Great Owl) are as you described - available only to institutions at Schwab and available for a seven figure min ($5M) at Fidelity.
Allspring (formerly Wells Fargo) institutional class shares, e.g. WFMIX (another MFO Great Owl) are available only to institutions at Schwab but open to retail investors at Fidelity. In an IRA (and only in an IRA), Fidelity sets no min. One could buy $50 worth for $99.95 including TF.
a CD of any bank that has the potential to be forced by regulators/ FDIC to be taken over by another bank, the acquiring bank is allowed to change the interest rate on the CD for the remaining time period prior to maturity - generally speaking.
Yes, but. There is an out. If the rate is changed, the saver is allowed to get out without penalty. The risk is in having one's long term rate lock broken. A saver does not face an unexpected liquidity risk; in a sense just the opposite.
Circumstances change over time. When I was still employed and younger, I was rather aggressive investor, traded often, and used Wellstrade Brokerage, because I was given 100 free trades a year. When I retired, my wife and I moved to a smaller city, to be close to my children and grandchildren. With that move and retirement, I decided to transfer my brokerage assets to Fidelity--that was a good experience for me until Fidelity started eliminating many of the Institutional share class funds, and replacing them with a different share class. I was not pleased with that decision by Fidelity, and decided to switch from Fidelity to Schwab Brokerage, because Schwab was still offering those Institutional share class funds that Fidelity was closing. Schwab also incentivized me to make that brokerage transfer, by offering to reduce the Transaction Fees, for the Institutional share class funds, to only a fraction of the normal Transaction Fee. It was also helpful that only Schwab had a brokerage office in the small city we had moved to. That was especially comforting to my wife, knowing she could go to the Schwab office for assistance, if she outlived me. Of the 3 brokerages I have used, Schwab provided me the best overall menu of funds, best fund research tool, and the most institutional share class funds. When I cashed out of the market in 2022, I had such a large amount of cash that I was able to invest in SNAXX as the Money Market fund that paid the highest rate. SNAXX has been paying close over 5.4% for most of 2023, and some of 2024, but recently dropped to around 5.3%. I am willing to hold larger amounts of cash in SNAXX for liquidity reasons, and wait for the CDs in highly rated Banks. I did decide to transfer a large chunk of money out of Schwab in 2023, to my Capital One Bank account, because they were offering CDs at a 5.25% rate, and if I needed to sell those Bank CDs early, my penalty would be just 3 months of interest. I prefer Bank CDs over Brokerage CDs, for liquidity reasons, but I am at my maximum FDIC insured amount for Capital One.
I agree that Schwab is better at providing access to institutional class shares. Above, I wrote: What Schwab did right was reduce the mins on lots of funds (including institutional share classes)".
Though more does not necessarily equate to better. Brokerages have been touting the number of funds on their platforms for decades. What matters is whether the platform offers what you want; not the gazillion funds you don't care about. Still, the more offered on a platform, the more likely it is that the fund you want is offered there.
Since day one, Fidelity has lagged Schwab in offering cheaper shares. Day one (more or less): Schwab offers Neuberger Berman investor class shares NTF, Fidelity offers Neuberger Berman Trust class shares (with an added 10 basis point fee) NTF. Fidelity currently pulls the same stunt by offering Pimco I3 shares (e.g. PIPNX) rather than class I shares (e.g. PIMIX) for an extra 15 basis points in ER.
Since I'm poking around at brokerages, I'll see what Schwab is willing to do for me about its transaction fees. They told me that they're getting many queriers from current VBS customers but I was waiting for tomorrow (Monday) to broach fees, promotions, etc.
Circumstances change over time. Indeed. It used to be that M* premium screener and associated human-written fund reports far surpassed what Schwab and Fidelity provided. (For a short period of time in the 90s(?) Schwab provided free M* reports to customers.) Now one is stuck using tools that are designed to present only the funds offered on brokerage platforms.
"a CD of any bank that has the potential to be forced by regulators/ FDIC to be taken over by another bank, the acquiring bank is allowed to change the interest rate on the CD for the remaining time period prior to maturity - generally speaking.
Yes, but. There is an out. If the rate is changed, the saver is allowed to get out without penalty. The risk is in having one's long term rate lock broken. A saver does not face an unexpected liquidity risk; in a sense just the opposite."
Yes, when the presumed lock on a long term rate is broken, the saver is allowed to withdraw the deposit. We would not have FDIC insured small banks if the saver is not allowed to withdraw in those circumstances. But my point was to alert posters not to just go after excessively high interest rate without paying attention to the potential for not being able to retain such excessively high interest rate for the term of the CD. This was a lesson learned by many CD buyers of Washington Mutual, Countrywide, and other such banks that offered excessively high interest rates prior to going under. I had to include this caution / additional info because I was advocating for buying FDIC insured CDs (and not because I was raising liquidity concerns related to broken CDs). If one had one of these as a brokered CD, I do not think one could readily get any reasonable bids for it at any of the brokerages where it is held (and the acquiring bank is potentially the only taker of that broken CD), and in that sense there is a liquidity constraint (say, relative to a JPM brokered CD), though that was not my main point in cautioning against chasing an excessively high interest rate CD.
Personally, I would care more about getting access to as many funds as possible than having to pay a transaction fees. I am fine to pay Fidelity's $50+$5 (auto pay). For example, I can not buy QLENX in my Schwab retail account ("institutional customers only" fund) but I can buy it in my Fidelity retail account. If I covert the Schwab account into an advisory account, I will be able to buy QLENX at Schwab but I will have to pay the advisory fees plus additional friction of it being an advisory account. So, QLEIX (Institutional class) being available for a $100K minimum at Schwab is of no use to me as the fees for the advisory account will exceed the difference in ER between QLENX and QLEIX. That is the example I was trying to drive at in my referring to QDSNX unavailability at Schwab in my earlier post.
I end up buying the funds Schwab makes available to "institutional customers only" in my Fidelity account and my Schwab account is more loaded with long term holdings of ETFs, individual stocks, and institutional class of mutual funds. I also use ETFs in place of Schwab MM funds. I do not know how much money Schwab makes on their payment for order flows but I can bet Fidelity makes a lot more from me on their MM funds and 12b-1 fees on non-Fidelity funds.
(Also, Fidelity's requirement of 60 days holding period to avoid their STR fees is a lot better than Schwab's 90 day requirement. So, if Schwab gives me access to QLENX, that is not as attractive as if it gave me access to QLEIX.)
I think it is a terrible business model for Schwab to classify so many funds as "institutional customers only" funds. But if it is working for Schwab and for many of you, who am I to ask for a change. Keep it going.
I'll be very thankful if and when the MFO community decisively designates some brokerage (any brokerage) as the absolute best outfit in the business. We can all transfer our accounts there, be happy, and never go through all of this again.
The nature of free/competitive market is that NOTHING stays at top forever. Well, maybe, Fido HSA that has ranked #1 in over a half-dozen years that I have been watching.
Brokerages have their pros and cons. I can say this because I have accounts at 3 brokerages - Schwab, Fido, and (involuntarily) Vanguard.
The nature of free/competitive market is that NOTHING stays at top forever. Well, maybe, Fido HSA that has ranked #1 in over a half-dozen years that I have been watching.
Brokerages have their pros and cons. I can say this because I have accounts at 3 brokerages - Schwab, Fido, and (involuntarily) Vanguard.
Absolutely. The focus of this thread was on "Compelling CDs", but it morphed into a discussion about Money Market funds, as a support component associated with CDs, and now it has morphed into an overall discussion about brokerages. If "fees" are a major reason to choose one brokerage over another, then you have to look at all kinds of fees, most notably transaction fees and early redemption fees. Then you can dig into the fees that specific investments charge, in deciding which and what kind of investment, you want to use.
Regarding "Compelling CD" investments, I don't find fees as a "compelling reason" to choose one brokerage versus another. Regarding Money Market investing, as a supporting component to CD investing, I also don't find fees as a "compelling reason" to select one brokerage versus another. However, if you are going to talk about mutual funds and other investing options, then fees start looking a little more important to me, but that is just one of many factors associated with why you select that brokerage.
I do not know how much money Schwab makes on their payment for order flows but I can bet Fidelity makes a lot more from me on their MM funds and 12b-1 fees on non-Fidelity funds.
In 2021, 10% of Schwab's total revenue came from PFOF. That was pure profit (Schwab doesn't incur extra expenses for routing to one exchange vs another). That contrasts with revenue from MMFs, where there are management expenses and other overhead that substantially reduce profits below gross revenue.
Regarding Money Market investing, as a supporting component to CD investing, I also don't find fees as a "compelling reason" to select one brokerage versus another.
Again, YMMV. For me, a 34 basis point difference in management fees (FDLXX vs. VUSXX) enough to get me looking outside of Fidelity for treasury MMFs. Unfortunately, I don't have the $1M in taxable cash readily on hand to get into SUTXX. I may stick with a Vanguard Cash Plus account for this reason.
@msf- If you can temporarily pool enough cash to get into SUTXX, once that fund is open you can reduce the holding to well below the $1m. I was advised on that at our local Schwab branch, and that's our situation at the moment, having just taken cash from SUTXX to buy a couple of CDs
Another alternative is SNSXX, which is the same fund, but with a slightly lower interest rate. We're using SNSXX for both of our IRA accounts.
Thanks. As it turns out, I just had a couple of conversations with Schwab today. They let me know about this option; they even referred to it as a loophole.
No way I could come up with that much cash in a taxable account. Whatever taxable cash I have has been gradually depleted over the past 15 years - going to pay taxes on Roth conversions. (The income restriction on conversions was removed in 2010.)
If you are looking for a highly competitive MM interest rate for your cash and can't find it at your brokerage, why not just put it into iShares Treasury Floating Rate Bond ETF (TFLO)?
Currently, the 30 Day SEC Yield is 5.33%. In addition, while interest on US Treasury bonds is taxable at the federal level, it is exempt from state and local income taxes.
TFLO currently invests 100% in Treasuries, hence the fund's interest is tax exempt at the state and local level.
Elsewhere (another thread) I considered SGOV or USFR as partial subs for Vanguard Cash Plus (which can hold MMFs as well as having a bank sweep).
I could use an internet bank for FDIC-covered cash (many still paying 5%+), and something like SGOV or USFR for liquid Treasury cash.
It looks like USFR has done slightly better than TFLO, outperforming or matching returns each year since 2017, with higher Sharpe ratio albeit with slightly higher volatility.
As it turns out, last year at least USFR held slightly more in Treasuries (99.9868%) than did TFLO (97.76%). Though that difference could easily be noise and could vary year by year. They're both essentially 100% Treasury funds. Just don't try telling that to the state taxing authorities
A problem using ETFs (or any bond fund) in lieu of a MMF is that either one takes the monthly divs in cash (rather than reinvesting) or one runs the risk of dealing with wash sales on each redemption. A minor nuisance but still something one needs to keep in mind.
msf said: "A problem using ETFs (or any bond fund) in lieu of a MMF is that either one takes the monthly divs in cash (rather than reinvesting) or one runs the risk of dealing with wash sales on each redemption. A minor nuisance but still something one needs to keep in mind."
@msf- If you can temporarily pool enough cash to get into SUTXX, once that fund is open you can reduce the holding to well below the $1m. I was advised on that at our local Schwab branch, and that's our situation at the moment, having just taken cash from SUTXX to buy a couple of CDs
Oddly enough, we just got a call from Fidelity. It was from the rep just assigned to our account after two years without one.
Since I'm in the process of moving assets from Vanguard (all to Fidelity and then some, possibly, to a new Schwab account), I had an extended conversation of what I'm looking for. Including a solid Treasury MMF. He made the same suggestion as you - if I can temporarily pool enough cash to get into FSIXX (Fidelity's equivalent of SUTXX), then I can reduce the holding to any amount.
I admit it - we're not starved for cash - but $1M is a whole heap of pocket change. Merrill provides access to FSIXX with a $1 min.
A couple of quirks with buying this via Merrill is that it settles same day, not T+1, and one can only invest whole dollars. I believe that even div reinvestments must be in whole dollars; any remaining cents go into the settlement account.
To avoid these quirks, at Merrill one might instead use TFFXX. Blackrock reports that 98.65% of its income was state-exempt last year, and 98.81% was state-exempt in 2022.
"MMFs at Merrill (generally next day settlement funds don't restrict transactions to whole dollars)" [underline added to show the previous link location.] FYI - The link takes one to the login page.
"A couple of quirks with buying this [FSIXX] via Merrill is that it settles same day, not T+1"
What is the concern with T+0?
"one can only invest whole dollars"
Is that a material concern? I am not sure I am following.
If you're already logged in (requires a Merrill account) the link takes you to the cited page. If you have a log in but are not logged in, then when you log in on that login page you'll land on the cited page.
If you don't have a login, you can still get the list of available MMFs from the next link (rates and mins). But you won't know what their settlement date is or by what hour you must submit orders for execution on the indicated day (ranging from 11:45AM to 5:00PM(!)).
Why it matters is that settlement dates affect when cash is needed for trades. I've been unable to do an exchange between two MMFs in the same family simply because they had different settlement days. I had to sell one fund and subsequently buy another. What other timing/trading impacts the differences in settlement days have I leave as an exercise.
Among other things, the inability to invest pennies means that small amounts of cash (earning virtually nothing) will gradually pile up. If your fund is paying $N.75 per month, then you'll have 75¢ in cash after one month, $1.50 in cash after two months, etc. I expect loose change in a couch but not in a financial institution. Material or not, this is a shortcoming that I've not seen at any other institution.
@msf, May be share with us as many or as few examples as you are able to about why T+0 is a concern. Right off the bat I am not able to imagine any. This is an educational enquiry for me.
The example I gave of an issue with T+0 had to do not with T+0 intrinsically, but rather with the friction between T+0 and T+1. It came from personal experience and I presented it only as an existence proof that inconsistent MMF settlement dates do create problems. At least at Merrill.
A while back there was another thread containing a few posts about potential gotchas with T+0 itself.
Comments
VG doesn't link m-mkt funds (like Fido), so, if you are in VMRXX, you would have to manually shift money between it and core/settlement VMFXX.
But if this headache is fine for you, go with VMRXX. 1 bps difference on $1 million is $100 difference over a year.
VMFXX: 5.27% SEC yield + 0.11% ER = 5.38% gross yield
Vanguard taxable MMF table
For more safety (backed by full faith and credit of Treasury), VUSXX has a gross yield that's a basis point lower. Repos (used by the other funds) are overcollateralized with government securities but are not directly backed by the government. https://www.sec.gov/files/mmfs-and-repo-market-021721.pdf
Geographic proximity will vary from person to person. There's a Schwab office just a five minute walk away from me. (The walk to Fidelity is about an hour, i.e. 3 miles, but it takes me over a national landmark, with views of a national monument and a local landmark.) More important to me is that Fidelity will notarize papers for me and give me a medallion stamp on the spot while the Schwab office doesn't have a notary on staff and sends papers to its back office for medallion stamps.
I opened a Vanguard taxable account precisely for access to a MMF, specifically VUSXX. SNSXX pay ¼% less, while FDLXX with a whopping 42 basis point ER isn't even yielding 5%. Vanguard isn't and has never been my preferred brokerage, but it has offered fund products I could not match elsewhere.
Years ago I (re)opened a Schwab account because of its (then) high interest checking account that provided an ATM card with no foreign exchange fees and full rebates. As with Vanguard, that's not something that would make Schwab my preferred brokerage, but at the time it was enough to get me in the door.
What Schwab did right was reduce the mins on lots of funds (including institutional share classes). There's often a reduced min at Fidelity as well for institutional shares within IRAs, but you wouldn't know this without an account where you can make test trades. The downside at Schwab is that each purchase will cost $49.95 (or more), while Fidelity usually charges $5 when investing "automatically".
Someone pointed out to me that Schwab also has an automatic investment system for funds. But when I called Schwab on Friday to ask about this, I was told that the only funds that are eligible for auto invest are NTF funds. (Perhaps the rep was mistaken?)
When I explained that I was looking around for a VBS replacement, the rep asked for contact info so that he could send me some information. He would also have my local office contact me to provide an overview of services. I agreed and will see what I hear from them soon.
(Fido allows one to convert investor class to institutional when the minimum is reached if the fund allows conversion- no additional fees.)
The friction with CDs is illiquidity, early withdrawal penalties, etc . Many investors, even those that will not take any credit risk on a portion of their portfolio, pay for the psychological security of liquidity by not buying CDs even when they know the probability of them needing to tap into that portion is near zero. Perhaps, to be human is to be irrational. Having said that if you are buying a CD of any bank that has the potential to be forced by regulators/ FDIC to be taken over by another bank, the acquiring bank is allowed to change the interest rate on the CD for the remaining time period prior to maturity - generally speaking. That is not a good excuse not to buy CDs of well capitalized banks but the liquidity, convenience, etc. are good excuses in my book! Cut people some slack (psychological indulgence).
@yogibearbull, Thanks for the recap of VMRXX.
Sometimes yes, sometimes no.
AQR institutional class shares, e.g. QDSIX (an MFO Great Owl) are as you described - available only to institutions at Schwab and available for a seven figure min ($5M) at Fidelity.
Allspring (formerly Wells Fargo) institutional class shares, e.g. WFMIX (another MFO Great Owl) are available only to institutions at Schwab but open to retail investors at Fidelity. In an IRA (and only in an IRA), Fidelity sets no min. One could buy $50 worth for $99.95 including TF.
a CD of any bank that has the potential to be forced by regulators/ FDIC to be taken over by another bank, the acquiring bank is allowed to change the interest rate on the CD for the remaining time period prior to maturity - generally speaking.
Yes, but. There is an out. If the rate is changed, the saver is allowed to get out without penalty. The risk is in having one's long term rate lock broken. A saver does not face an unexpected liquidity risk; in a sense just the opposite.
https://www.fdic.gov/consumers/banking/facts/payment.html
(See: How does a bank closing affect interest accruing on my deposits?)
Though more does not necessarily equate to better. Brokerages have been touting the number of funds on their platforms for decades. What matters is whether the platform offers what you want; not the gazillion funds you don't care about. Still, the more offered on a platform, the more likely it is that the fund you want is offered there.
Since day one, Fidelity has lagged Schwab in offering cheaper shares. Day one (more or less): Schwab offers Neuberger Berman investor class shares NTF, Fidelity offers Neuberger Berman Trust class shares (with an added 10 basis point fee) NTF. Fidelity currently pulls the same stunt by offering Pimco I3 shares (e.g. PIPNX) rather than class I shares (e.g. PIMIX) for an extra 15 basis points in ER.
Since I'm poking around at brokerages, I'll see what Schwab is willing to do for me about its transaction fees. They told me that they're getting many queriers from current VBS customers but I was waiting for tomorrow (Monday) to broach fees, promotions, etc.
Circumstances change over time.
Indeed. It used to be that M* premium screener and associated human-written fund reports far surpassed what Schwab and Fidelity provided. (For a short period of time in the 90s(?) Schwab provided free M* reports to customers.) Now one is stuck using tools that are designed to present only the funds offered on brokerage platforms.
Yes, but. There is an out. If the rate is changed, the saver is allowed to get out without penalty. The risk is in having one's long term rate lock broken. A saver does not face an unexpected liquidity risk; in a sense just the opposite."
Yes, when the presumed lock on a long term rate is broken, the saver is allowed to withdraw the deposit. We would not have FDIC insured small banks if the saver is not allowed to withdraw in those circumstances. But my point was to alert posters not to just go after excessively high interest rate without paying attention to the potential for not being able to retain such excessively high interest rate for the term of the CD. This was a lesson learned by many CD buyers of Washington Mutual, Countrywide, and other such banks that offered excessively high interest rates prior to going under. I had to include this caution / additional info because I was advocating for buying FDIC insured CDs (and not because I was raising liquidity concerns related to broken CDs). If one had one of these as a brokered CD, I do not think one could readily get any reasonable bids for it at any of the brokerages where it is held (and the acquiring bank is potentially the only taker of that broken CD), and in that sense there is a liquidity constraint (say, relative to a JPM brokered CD), though that was not my main point in cautioning against chasing an excessively high interest rate CD.
I end up buying the funds Schwab makes available to "institutional customers only" in my Fidelity account and my Schwab account is more loaded with long term holdings of ETFs, individual stocks, and institutional class of mutual funds. I also use ETFs in place of Schwab MM funds. I do not know how much money Schwab makes on their payment for order flows but I can bet Fidelity makes a lot more from me on their MM funds and 12b-1 fees on non-Fidelity funds.
(Also, Fidelity's requirement of 60 days holding period to avoid their STR fees is a lot better than Schwab's 90 day requirement. So, if Schwab gives me access to QLENX, that is not as attractive as if it gave me access to QLEIX.)
I think it is a terrible business model for Schwab to classify so many funds as "institutional customers only" funds. But if it is working for Schwab and for many of you, who am I to ask for a change. Keep it going.
Brokerages have their pros and cons. I can say this because I have accounts at 3 brokerages - Schwab, Fido, and (involuntarily) Vanguard.
Regarding "Compelling CD" investments, I don't find fees as a "compelling reason" to choose one brokerage versus another. Regarding Money Market investing, as a supporting component to CD investing, I also don't find fees as a "compelling reason" to select one brokerage versus another. However, if you are going to talk about mutual funds and other investing options, then fees start looking a little more important to me, but that is just one of many factors associated with why you select that brokerage.
In 2021, 10% of Schwab's total revenue came from PFOF. That was pure profit (Schwab doesn't incur extra expenses for routing to one exchange vs another). That contrasts with revenue from MMFs, where there are management expenses and other overhead that substantially reduce profits below gross revenue.
Regarding Money Market investing, as a supporting component to CD investing, I also don't find fees as a "compelling reason" to select one brokerage versus another.
Again, YMMV. For me, a 34 basis point difference in management fees (FDLXX vs. VUSXX) enough to get me looking outside of Fidelity for treasury MMFs. Unfortunately, I don't have the $1M in taxable cash readily on hand to get into SUTXX. I may stick with a Vanguard Cash Plus account for this reason.
Another alternative is SNSXX, which is the same fund, but with a slightly lower interest rate. We're using SNSXX for both of our IRA accounts.
No way I could come up with that much cash in a taxable account. Whatever taxable cash I have has been gradually depleted over the past 15 years - going to pay taxes on Roth conversions. (The income restriction on conversions was removed in 2010.)
Currently, the 30 Day SEC Yield is 5.33%. In addition, while interest on US Treasury bonds is taxable at the federal level, it is exempt from state and local income taxes.
TFLO currently invests 100% in Treasuries, hence the fund's interest is tax exempt at the state and local level.
Elsewhere (another thread) I considered SGOV or USFR as partial subs for Vanguard Cash Plus (which can hold MMFs as well as having a bank sweep). It looks like USFR has done slightly better than TFLO, outperforming or matching returns each year since 2017, with higher Sharpe ratio albeit with slightly higher volatility.
Portfolio Visualizer comparison
As it turns out, last year at least USFR held slightly more in Treasuries (99.9868%) than did TFLO (97.76%). Though that difference could easily be noise and could vary year by year. They're both essentially 100% Treasury funds. Just don't try telling that to the state taxing authorities
A problem using ETFs (or any bond fund) in lieu of a MMF is that either one takes the monthly divs in cash (rather than reinvesting) or one runs the risk of dealing with wash sales on each redemption. A minor nuisance but still something one needs to keep in mind.
Good point, msf.
Since I'm in the process of moving assets from Vanguard (all to Fidelity and then some, possibly, to a new Schwab account), I had an extended conversation of what I'm looking for. Including a solid Treasury MMF. He made the same suggestion as you - if I can temporarily pool enough cash to get into FSIXX (Fidelity's equivalent of SUTXX), then I can reduce the holding to any amount.
I admit it - we're not starved for cash - but $1M is a whole heap of pocket change. Merrill provides access to FSIXX with a $1 min.
A couple of quirks with buying this via Merrill is that it settles same day, not T+1, and one can only invest whole dollars. I believe that even div reinvestments must be in whole dollars; any remaining cents go into the settlement account.
To avoid these quirks, at Merrill one might instead use TFFXX. Blackrock reports that 98.65% of its income was state-exempt last year, and 98.81% was state-exempt in 2022.
MMFs at Merrill (generally next day settlement funds don't restrict transactions to whole dollars)
MMF rates and mins
"A couple of quirks with buying this [FSIXX] via Merrill is that it settles same day, not T+1"
What is the concern with T+0?
"one can only invest whole dollars"
Is that a material concern? I am not sure I am following.
If you're already logged in (requires a Merrill account) the link takes you to the cited page. If you have a log in but are not logged in, then when you log in on that login page you'll land on the cited page.
If you don't have a login, you can still get the list of available MMFs from the next link (rates and mins). But you won't know what their settlement date is or by what hour you must submit orders for execution on the indicated day (ranging from 11:45AM to 5:00PM(!)).
Why it matters is that settlement dates affect when cash is needed for trades. I've been unable to do an exchange between two MMFs in the same family simply because they had different settlement days. I had to sell one fund and subsequently buy another. What other timing/trading impacts the differences in settlement days have I leave as an exercise.
Among other things, the inability to invest pennies means that small amounts of cash (earning virtually nothing) will gradually pile up. If your fund is paying $N.75 per month, then you'll have 75¢ in cash after one month, $1.50 in cash after two months, etc. I expect loose change in a couch but not in a financial institution. Material or not, this is a shortcoming that I've not seen at any other institution.
I'm wondering if any of you folks have a preferred site for checking bank safety ratings for use in buying CDs?
Thanks!
You may also want to check Bankrate.
https://www.bankrate.com/banking/reviews/morgan-stanley-private/
https://weissratings.com/en/banking
A while back there was another thread containing a few posts about potential gotchas with T+0 itself.