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While I agree with the general principle of the post, I am skeptical of the fact that schwab published it. If it was done third party research, I would trust it

While I agree with the general principle of the post, I am skeptical of the fact that schwab published it. If it was done third party research, I would trust it more. (Internet has made me skeptical) However, the only incentive I can think of schwab is to encourage people to invest ASAP they have cash so schwab can get that money in their system so they can charge fees/still services. But that’s just normal business

anonu 3y ago
Schwab would rather you have cash in your account than be invested in securities. This is how their cash sweep works. The article is educational and generally stands up to the research on the topic. It is designed to build trust with clients so they invest in Schwab.
- TacticalCoder 3y ago
  > Schwab would rather you have cash in your account than be invested in securities Compared to IBKR which gives "benchmark - 0.5%" on your NAV in USD, what does Schwab give for your USD sitting idle?
  - anonu 3y ago
    Cash sweep in Schwab is like 0.5%, it's nothing. But this is how they make their money, turning around and lending at 8%. But you can just as easily buy a short duration Treasury ETF yielding 5%+ or a CD.
    - zie 3y ago
      Or even Schwab MMF's, which are reasonable. It's mostly just the default that's terrible on return.
  - tylergetsay 3y ago
    Schwab gives a similar return, they don't offer any high yield savings
  - matwood 3y ago
    It's not an automatic sweep, but anyone holding cash at Schwab moves it to something like SWVXX [1] paying ~5% right now. [1] https://www.schwabassetmanagement.com/products/swvxx https://www.schwabassetmanagement.com/products/swvxx
    - everybodyknows 3y ago
      Beware that such a mutual fund buy transaction closes at end of day. A sale of a stock or ETF closes 2-3 days in the future. So if you place both orders concurrently in your margin account, you may find you've borrowed from Schwab for those 2-3 days on margin, at a rate of ~10%. Schwab's order screen will not warn you of this in advance. What happens if you make this mistake in a "cash account" i.e. no margin allowed I do not know and hope not to find out by means of usual accidental carelessness. An alternative to SWVXX is VUSB, which trades with standard ETF timing.

anonu 3y ago

Schwab would rather you have cash in your account than be invested in securities. This is how their cash sweep works. The article is educational and generally stands up to the research on the topic. It is designed to build trust with clients so they invest in Schwab.

TacticalCoder 3y ago
> Schwab would rather you have cash in your account than be invested in securities Compared to IBKR which gives "benchmark - 0.5%" on your NAV in USD, what does Schwab give for your USD sitting idle?
- anonu 3y ago
  Cash sweep in Schwab is like 0.5%, it's nothing. But this is how they make their money, turning around and lending at 8%. But you can just as easily buy a short duration Treasury ETF yielding 5%+ or a CD.
  - zie 3y ago
    Or even Schwab MMF's, which are reasonable. It's mostly just the default that's terrible on return.
- tylergetsay 3y ago
  Schwab gives a similar return, they don't offer any high yield savings
- matwood 3y ago
  It's not an automatic sweep, but anyone holding cash at Schwab moves it to something like SWVXX [1] paying ~5% right now. [1] https://www.schwabassetmanagement.com/products/swvxx https://www.schwabassetmanagement.com/products/swvxx
  - everybodyknows 3y ago
    Beware that such a mutual fund buy transaction closes at end of day. A sale of a stock or ETF closes 2-3 days in the future. So if you place both orders concurrently in your margin account, you may find you've borrowed from Schwab for those 2-3 days on margin, at a rate of ~10%. Schwab's order screen will not warn you of this in advance. What happens if you make this mistake in a "cash account" i.e. no margin allowed I do not know and hope not to find out by means of usual accidental carelessness. An alternative to SWVXX is VUSB, which trades with standard ETF timing.