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⚠️Warning: XX Content!
Published 9 months ago • 4 min read
Presented By: The Early Bird from MarketBeat
Official Affiliate Partner: The Early Bird from MarketBeat
Hello again, Investors!
I wanted to share a story about a recent suggestion from one of our readers, John.
He said: "You're putting your money in cash in the Schwab SWVXX the problem is you're paying 0.35% management fee and I believe your interest is 4.95% So here's a better one put it in the Vanguard VMFXX first of all you'll get a return of about 5.03% and your management fee is only0 .11% I gotta help my buddy Russ, who usually looks up simply safe for me whenever I requested on the show so I gotta help Bro Russ 😀"
Much appreciated John and it sounds like a great idea, right?
Quick Comparison
So, I decided to look into VMFXX, and here’s a quick comparison:
What it is: A money market fund that invests in high-quality, short-term investments.
Why it’s good: It usually offers more yield than government-only funds but still focuses on safety.
Current Yield: 4.76%
Expense Ratio: 0.34%
Inception Date: 4/30/1992
Historical Performance: 5Y Total Return ~11.22%
The Discovery
I went to my Schwab account, all set to follow John’s advice, only to find out that I couldn’t buy VMFXX through Schwab.
VMFXX is a Vanguard product, and you can only buy it through a Vanguard brokerage account.
Since I’m not interested in opening a new brokerage account just to buy this, I'm sticking with SWVXX.
Why You Can’t Buy VMFXX at Schwab
Different Companies: Vanguard and Schwab are separate companies. Each has its own products.
Banking Products: Money market funds are considered banking products. You can only buy Vanguard’s VMFXX through Vanguard, Schwab’s SWVXX through Schwab, and Fidelity’s SPAXX through Fidelity.
Fun Fact: Why the “XX”?
Have you ever wondered why there’s an “XX” at the end of these ticker symbols?
It’s actually a way to distinguish money market funds from other types of investments.
The “XX” signals that it’s a money market fund, while a single “X” at the end of a ticker symbol usually indicates a mutual fund12.
The Takeaway
Money market funds like VMFXX and SWVXX are great for money you don’t want to risk losing.
They aim to keep the price per share at $1.00, making them a stable place to park your cash.
These are not “get rich” vehicles, but they do allow your money to make money without much risk.
However, keep in mind that when interest rates are cut, the yields on these funds will eventually drop as well.
I mentioned in a recent newsletter that I’m using SWVXX as a temporary cash pit stop while I decide what to do with the proceeds from my sale of 157 shares of TD. These funds are perfect for that kind of short-term holding.
Your Turn
What do you think about using money market funds as a safe place for your cash? Have you had any similar experiences or suggestions? Hit reply and let me know your thoughts!
😁THANK YOU to everyone who responded to the last newsletter!!
🤑Rick Stambaugh from Orange Mountain Financial brings you ‘Grow Retirement Income.' He’s a seasoned pro with over 30 years in trading and a passion for guiding folks to a prosperous retirement.
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Each week you'll learn how to be a better dividend investor and follow the journey of a welder with a passion for passive income to $1,000,000 and beyond.
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