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Vanguard offers new Options for Meeting Investors’ Short-Term Liquidity Needs
Their MMF competitors would be Treasury MMFs, both for security quality (Treasuries backed by the US government) and IMHO more importantly, for state income tax exemption.
If you can't find a very cheap Treasury only MMF (e.g. no low min cheap funds at Schwab or at Fidelity), then a 0-3 month Treasury ETF can fill that gap. While costs do matter, if I owned SGOV (0.09% ER), I don't think I would jump ship for Vanguard's new shorter term ETF (0.07% ER).
If I were still investing at Vanguard, I would carefully consider whether the added limited volatility of an ETF were worth at best a small increase in return over VUSXX.
Going longer, with Treasuries maturing in up to a full year, theory says one will get better returns in exchange for added volatility. I still buy that theory in the face of data that contradicts that - giving a whole new meaning to faith-based investing
See Portfolio Visualizer comparing iShares (SHV), Invesco (TBLL), and Goldman Sachs (GBIL) with 3 mo Treasuries (proxy for cash). At least it does show that the cheapest ETF (TBILL, 0.08% ER) comes out best in this space where costs really should be paramount. PV comparison
Something to keep in mind is whether the Vanguard ETFs will be 100% invested in Treasuries. You don't get a tax break for repurchase agreements (see, e.g. FZFXX). While VUSXX is now about 98% Treasuries, a couple of years ago it dipped as low as 50%+ (from memory). Previously it had always held 100% in Treasuries and suddenly changed. In light of that, it remains to be seen what percentage of these ETFs are really invested in true Treasuries.
"Vanguard Ultra-Short Treasury ETf (VGUS) and Vanguard 0-3 Month Treasury Bill ETf (VBIL) are index ETFs that will offer low-cost Treasury exposure for individual investors and financial advisors."
"VGUS will hold Treasuries with maturities less than 12 months, while VBIL will focus on Treasury bills maturing in three months or less."
The Ultra-Short Treasury ETf won't have the shortest maturity within Vanguard's Treasury ETf offerings. In my opinion, Vanguard could have created a better fund name to prevent potential customer confusion!
Comments
https://stockcharts.com/sc3/ui/?s=VMFXX&id=p30227210977&compare=ICSH,USFR,VUSB&perf=false
Vanguard ultra-ST VUSB has duration on the high end of the category - it's benefitting from that now, but that could change.
Looks like VG has found a solution to the duration issue by offering new ETFs with more targeted duration.
If you can't find a very cheap Treasury only MMF (e.g. no low min cheap funds at Schwab or at Fidelity), then a 0-3 month Treasury ETF can fill that gap. While costs do matter, if I owned SGOV (0.09% ER), I don't think I would jump ship for Vanguard's new shorter term ETF (0.07% ER).
If I were still investing at Vanguard, I would carefully consider whether the added limited volatility of an ETF were worth at best a small increase in return over VUSXX.
Going longer, with Treasuries maturing in up to a full year, theory says one will get better returns in exchange for added volatility. I still buy that theory in the face of data that contradicts that - giving a whole new meaning to faith-based investing
See Portfolio Visualizer comparing iShares (SHV), Invesco (TBLL), and Goldman Sachs (GBIL) with 3 mo Treasuries (proxy for cash). At least it does show that the cheapest ETF (TBILL, 0.08% ER) comes out best in this space where costs really should be paramount.
PV comparison
Something to keep in mind is whether the Vanguard ETFs will be 100% invested in Treasuries. You don't get a tax break for repurchase agreements (see, e.g. FZFXX). While VUSXX is now about 98% Treasuries, a couple of years ago it dipped as low as 50%+ (from memory). Previously it had always held 100% in Treasuries and suddenly changed. In light of that, it remains to be seen what percentage of these ETFs are really invested in true Treasuries.
are index ETFs that will offer low-cost Treasury exposure for individual investors and financial advisors."
"VGUS will hold Treasuries with maturities less than 12 months,
while VBIL will focus on Treasury bills maturing in three months or less."
The Ultra-Short Treasury ETf won't have the shortest maturity within Vanguard's Treasury ETf offerings.
In my opinion, Vanguard could have created a better fund name to prevent potential customer confusion!