Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Vanguard has two different cash sweep programs. They both use the same banks. For reasons described below not having to do with safety, I wouldn't be inclined to keep much money in either sweep account.
Vanguard Cash Deposit uses the FDIC-insured bank deposits instead of VMFXX as one's core (transaction) account in a Vanguard brokerage account.
Its current 3.7% APY is well below that of VMFXX (5.28% 7 day yield, compounding to 5.41%) or many internet banks. This is not a place for long term cash. It's just a place to park trading dollars.
Vanguard Cash Plus Account is Vanguard's latest attempt at providing limited cash management services (no checking or ATM access). Its 4.70% APY looks very good compared with internet banks. But still less than MMFs. Because this account comes with a routing number, you can do EFTs into and out of Vanguard this way.
It is currently just a pilot program open by invitation only. I haven't been invited
Aside from the transfer feature, I'm still more inclined to use a Vanguard MMF for cash. If safety is a concern, one can use a government MMF. Still higher yield and safer underlying holdings.
In the end, if you are keeping a fair amount of money in one of these Vanguard programs and you're not comfortable with FDIC coverage, you can opt out of using Bank of Baroda among the sweep banks.
I received an email from Vanguard a few days ago touting Vanguard Cash Deposit. This doesn't appeal to me when 7-day yields for VMRXX and VMFXX are 5.29% and 5.28% respectively. I believe Vanguard would never allow these money market funds to "break the buck" therefore the lack of FDIC insurance is not a concern.
Comments
Vanguard Cash Deposit uses the FDIC-insured bank deposits instead of VMFXX as one's core (transaction) account in a Vanguard brokerage account.
Its current 3.7% APY is well below that of VMFXX (5.28% 7 day yield, compounding to 5.41%) or many internet banks. This is not a place for long term cash. It's just a place to park trading dollars.
Vanguard Cash Plus Account is Vanguard's latest attempt at providing limited cash management services (no checking or ATM access). Its 4.70% APY looks very good compared with internet banks. But still less than MMFs. Because this account comes with a routing number, you can do EFTs into and out of Vanguard this way.
It is currently just a pilot program open by invitation only. I haven't been invited
Aside from the transfer feature, I'm still more inclined to use a Vanguard MMF for cash. If safety is a concern, one can use a government MMF. Still higher yield and safer underlying holdings.
In the end, if you are keeping a fair amount of money in one of these Vanguard programs and you're not comfortable with FDIC coverage, you can opt out of using Bank of Baroda among the sweep banks.
This doesn't appeal to me when 7-day yields for VMRXX and VMFXX are 5.29% and 5.28% respectively.
I believe Vanguard would never allow these money market funds to "break the buck"
therefore the lack of FDIC insurance is not a concern.