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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
by 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 agoCash 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 agoOr even Schwab MMF's, which are reasonable. It's mostly just the default that's terrible on return.
- tylergetsay 3y agoSchwab gives a similar return, they don't offer any high yield savings
- matwood 3y agoIt'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 agoBeware 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.