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Cash just sitting untouched in my Vanguard account's default money market is earning more than my Marcus account. I had to transfer everything out of Marcus bec

Cash just sitting untouched in my Vanguard account's default money market is earning more than my Marcus account. I had to transfer everything out of Marcus because there was no point in using it.

etrautmann 3y ago
As of right now, Marcus is yielding 4.4% APY while Vanguard Federal Money Market Fund (VMFXX) is paying 5.3%
symlinkk 3y ago
That isn’t FDIC insured like Marcus (or other HYSA) are.
- paxys 3y ago
  True, but Vanguard has "too big to fail" insurance.
  - amethyst 3y ago
    Pretty sure that "insurance" only covers their money, not yours.
    - adastra22 3y ago
      Vanguard is an investor-owned mutual company, so that's one and the same, no?
- hagy 3y ago
  The default settlement account, Vanguard Federal Money Market Fund, has incredibly low credit risk because its assets are short-term US Federal gov debt and Federal Reserve repurchase agreements. [1] Neither of those entities have substantial default risk. Further, the global financial chaos of significant defaults from either of those entities would likely render FDIC insurance ineffective because too many banks would fail simultaneously due to their assets in those classes. [1] https://investor.vanguard.com/investment-products/mutual-funds/profile/vmfxx#portfolio-composition https://investor.vanguard.com/investment-products/mutual-fun...
  - adastra22 3y ago
    Or Vanguard could collapse from the inside because some C-level officer was dipping into customer funds to cover some bad investment, and everyone takes a haircut on the holdings. On top of the drop in market value because most vanguard customers invest in vanguard funds, which suddenly become a toxic asset. Your "safe" money market asset is considered equal and paid out pro-rata, sharing the loss of those mutual funds. Meanwhile the FDIC insured savings accounts at the bank next door are just fine in the midst of this total and complete market meltdown, and those account holders decide it's time to diversify and pick up some cheap stocks. That's just one scenario. “Low risk” is not the same as no risk, and the difference isn't important until it suddenly is.
    - hagy 3y ago
      That is impossible because each Vanguard mutual fund is a distinct legal entity. Assets cannot be moved between funds. See Vanguard safety for more details: https://www.bogleheads.org/wiki/Vanguard_safety https://www.bogleheads.org/wiki/Vanguard_safety
      - atombender 3y ago
        Vanguard has about 30 SEC registrants (formally, Delaware Statutory Trusts) for all its US mutual funds. But it has a lot more than 30 funds. For example, VMFXX is managed by Vanguard Money Market Reserves, which also holds VUSXX and the former VMMXX.
    - jquast 3y ago
      https://investor.vanguard.com/investor-resources-education/article/sipc-vs-fdic-insurance https://investor.vanguard.com/investor-resources-education/a... I’m very certain that even in the crazy case you have outlined, SIPC insurance would cover up to a half million. Some brokers provide additional insurance beyond the regulatory requirements. I think everyone recently learned about FDIC because of SVB etc., but I think it’s important that people are also aware of SIPC, and especially to consider that there is no crypto currency exchange that offers any such insurance of any kind, https://www.forbes.com/advisor/investing/cryptocurrency/crypto-exchange-account-insurance/ https://www.forbes.com/advisor/investing/cryptocurrency/cryp...

Cash just sitting untouched in my Vanguard account's default money market is earning more than my Marcus account. I had to transfer everything out of Marcus because there was no point in using it.

etrautmann 3y ago

As of right now, Marcus is yielding 4.4% APY while Vanguard Federal Money Market Fund (VMFXX) is paying 5.3%

symlinkk 3y ago

That isn’t FDIC insured like Marcus (or other HYSA) are.

paxys 3y ago
True, but Vanguard has "too big to fail" insurance.
- amethyst 3y ago
  Pretty sure that "insurance" only covers their money, not yours.
  - adastra22 3y ago
    Vanguard is an investor-owned mutual company, so that's one and the same, no?
hagy 3y ago
The default settlement account, Vanguard Federal Money Market Fund, has incredibly low credit risk because its assets are short-term US Federal gov debt and Federal Reserve repurchase agreements. [1] Neither of those entities have substantial default risk. Further, the global financial chaos of significant defaults from either of those entities would likely render FDIC insurance ineffective because too many banks would fail simultaneously due to their assets in those classes. [1] https://investor.vanguard.com/investment-products/mutual-funds/profile/vmfxx#portfolio-composition https://investor.vanguard.com/investment-products/mutual-fun...
- adastra22 3y ago
  Or Vanguard could collapse from the inside because some C-level officer was dipping into customer funds to cover some bad investment, and everyone takes a haircut on the holdings. On top of the drop in market value because most vanguard customers invest in vanguard funds, which suddenly become a toxic asset. Your "safe" money market asset is considered equal and paid out pro-rata, sharing the loss of those mutual funds. Meanwhile the FDIC insured savings accounts at the bank next door are just fine in the midst of this total and complete market meltdown, and those account holders decide it's time to diversify and pick up some cheap stocks. That's just one scenario. “Low risk” is not the same as no risk, and the difference isn't important until it suddenly is.
  - hagy 3y ago
    That is impossible because each Vanguard mutual fund is a distinct legal entity. Assets cannot be moved between funds. See Vanguard safety for more details: https://www.bogleheads.org/wiki/Vanguard_safety https://www.bogleheads.org/wiki/Vanguard_safety
    - atombender 3y ago
      Vanguard has about 30 SEC registrants (formally, Delaware Statutory Trusts) for all its US mutual funds. But it has a lot more than 30 funds. For example, VMFXX is managed by Vanguard Money Market Reserves, which also holds VUSXX and the former VMMXX.
  - jquast 3y ago
    https://investor.vanguard.com/investor-resources-education/article/sipc-vs-fdic-insurance https://investor.vanguard.com/investor-resources-education/a... I’m very certain that even in the crazy case you have outlined, SIPC insurance would cover up to a half million. Some brokers provide additional insurance beyond the regulatory requirements. I think everyone recently learned about FDIC because of SVB etc., but I think it’s important that people are also aware of SIPC, and especially to consider that there is no crypto currency exchange that offers any such insurance of any kind, https://www.forbes.com/advisor/investing/cryptocurrency/crypto-exchange-account-insurance/ https://www.forbes.com/advisor/investing/cryptocurrency/cryp...