8 ms·

HYSA are great but even better are buying money market funds or tbills. Money market funds restrictions are they can be bought/sold during market hours and tbi

by sahila 3y ago

HYSA are great but even better are buying money market funds or tbills. Money market funds restrictions are they can be bought/sold during market hours and tbills have a specified lock up period, like a month or more. Both can be bought from your broker, it’s intimidating but actually quite simple. For example buying money market vusxx fund today is giving an equivalent 6.25% apy for high tax earners in California - this is because much of it is tax exempt whereas hysa is not. This google sheet has all of the current rates and is useful: https://docs.google.com/spreadsheets/d/1v3fn3sZRvkSgqb-RnN2gSWqgXdbGbDO8GdKaxE-MYEM/edit?usp=sharing https://docs.google.com/spreadsheets/d/1v3fn3sZRvkSgqb-RnN2g...

giarc 3y ago
I'm just seeing a bunch of #NAME errors.
- santoshalper 3y ago
  Same
- mdrzn 3y ago
  Click on the "Instructions" tab at the bottom of the page, you have to create a copy for your personal use. The #NAME errors is caused by the table trying to get data from a tab called "My RateSet" which doesn't exists yet.
- deleted 3y ago
  [deleted]
lotsofpulp 3y ago
TTTXX at BoA/Merrill is another one. Although, in a shit hits the fan scenario, I would expect to be able to access my FDIC insured account money more reliably than a money market fund.
7moritz7 3y ago
I don't see any reasons not to put everything into diversified ETFs. Low risk, reliably comparatively high returns unless the world economy or the entire US economy crash (which would ruin the value of almost every asset anyways).
- dannyw 3y ago
  Your emergency fund shouldn’t be in stocks.
- dageshi 3y ago
  What you suggest is comparatively high risk vs tbills and MM funds. T-bills are literally the safest possible investment bar none.
  - giantg2 3y ago
    "T-bills are literally the safest possible investment bar none." Wouldn't I bonds be safest? They protect against inflation.
    - tallanvor 3y ago
      You can only buy $10k worth of I-bonds per year. But you're correct that I-bonds are designed to prevent you from losing money.
      - giantg2 3y ago
        Most people don't have $10k a year to invest anyways.
      - naniwaduni 3y ago
        You're still taxed on nominal gains on I bonds, so in principle you're still exposed to potential downside up to your tax rate. The way rates are set on I bonds is also unusually subject to tracking error.
    - trogdor 3y ago
      “Safe” in this context generally refers only to downside risk. T-bills are safer than I-bonds because T-bills are short-term investments. I-bonds have an early-withdrawal penalty. (I-bonds also have a $10,000 annual purchase limit, but that’s less-relevant.)
2OEH8eoCRo0 3y ago
Aren't money market funds only good today because of the high fed interest rate? If/when that comes back down so will the money market rates.
- matthewaveryusa 3y ago
  Higher than 0% yes. Historically rates are still on the low side. And yes they move with the fed rate.
- Bluecobra 3y ago
  Yes. When they start cutting rates that would be good time to buy Treasury Notes/Bonds or longer term CDs so you can lock in the interest rate for a period of time.
  - naniwaduni 3y ago
    Expected rate cuts are generally already priced into longer-term bond prices, so trying to get in just before rates go down is basically exactly as hard as market timing.
- anxrn 3y ago
  And so will HYSA rates.
thesuitonym 3y ago
It's my understanding that high yield savings accounts are still the best place for an emergency fund. A tbill might net you more money, but if you're still 8 months from maturity, how does that help you at all?
- NordSteve 3y ago
  Sell the bill? Market is very liquid.
  - nonethewiser 3y ago
    If you have to wait 2-3 days to get money your money its not an emergency fund.
    - ixwt 3y ago
      So putting my money into a HYSA isn't a good place for an emergency fund? It will take 2-3 days to transfer (without fees). I've never understood this mentality. I've got a credit card with nearly 6 months of expenses as a limit, most of it not used because I pay it off month to month. I'd be more worried about the tax implications of selling ETFs and such than the 2-3 days of wait to transfer. Maybe I lack imagination, but I can't think of anything that I'd need my entire emergency fund immediately. Throw the emergency cost onto a credit card, and transfer the money from the emergency fund to pay off the bill. I guess that doesn't work in some other countries where credit cards aren't as prolific as the US.
      - haswell 3y ago
        > It will take 2-3 days to transfer (without fees). This depends on the bank. If you have a checking account with the same bank, the funds can be available right away. The standard withdrawal frequency limits still apply.
        abofh 3y ago
        Withdrawal limits on savings accounts were suspended for COVID, and at least in my experience, hasn't come back - but ymmv
HumblyTossed 3y ago
> but even better This is highly dependent on what the intended purpose of the money is.
roland35 3y ago
There comes a point where you are optimizing finances beyond what is necessary, in my opinion. Have a decent plan for your cash so it's earning good interest, then go out and focus your time on the rest of life. Automate as much as possible. Don't worry about a few $10s of extra interest!
- rrrrrrrrrrrryan 3y ago
  There are times when you need to have a ton of money in cash or near-cash (e.g. saving for a down payment for a first home), and then it makes a lot of sense to optimize. For a normal emergency savings fund, it does not make sense (unless you legitimately enjoy doing it!)
- alemanek 3y ago
  If your bank account is also at your broker (ex. Schwab, Fidelity) then money market funds are actually more convenient than a HYSA. My money market fund money is available the day after I sell and there is no waiting period to transfer between my accounts at Schwab. Also I can use the money market fund to underwrite cash secured puts or for other investment activities. Transferring between institutions I have had take 3-5 days before funds clear. Wires can be faster but come with fees and a whole bunch of questions to make sure you aren’t a scammer trying to empty an account. So, it is good to know about all your options. I keep my 6month emergency fund in SNOXX money market fund. With Fidelity you can set a sweep to go into their short term treasury fund and not even have to sell anything to transfer the money out.
soupfordummies 3y ago
I did some cursory reading on money market funds (MMFs) and I don't quite get the advantage if rates are roughly the same? For instance, if there is a high-yield savings account (HYSA) option that gives 5.3% interest and a MMF that gives 5.4% (with a 0.1% expense ratio), would I not receive the same amount of interest in practice? Not trying to disagree with you or anything, just making sure I understand the vehicle.
- naniwaduni 3y ago
  Usually, taxation differences. Also, MMF yields are generally quoted net of expense ratios already, you don't subtract them out a second time.
- latchkey 3y ago
  5.3% https://www.viobank.com/cornerstone-money-market-savings https://www.viobank.com/cornerstone-money-market-savings
- balderdash 3y ago
  From a practical standpoint they’re the same - it’s the at the margin (MMF is likely to “reset” more quickly than a high yield savings account, you’re also risking it “breaking the buck” in times of extreme stress, + a lot of the income in a MMF you won’t pay state tax on, on the other hand an HYSA is FDIC insured)
greyface- 3y ago
> tbills have a specified lock up period, like a month or more What is this referring to? I've bought and sold T-Bills in the same week, and have never encountered anything about a lockup.
- balderdash 3y ago
  I think they may be confusing it with savings bonds
- sahila 3y ago
  You’re right you can but/sell on the secondary markets easily. If you buy it directly on treasurydirect.gov, then you might have a lockup depending on the time interval you pick.
deleted 3y ago
[deleted]
3pm 3y ago
And there is a way to pay no taxes on the growth. You need to have 1) a tax advantaged account and 2) a regular brokerage with 2x your savings Technically tax is deferred or literally not paid if tax advantaged account is a Roth. https://www.bogleheads.org/wiki/Placing_cash_needs_in_a_tax-advantaged_account https://www.bogleheads.org/wiki/Placing_cash_needs_in_a_tax-...

by sahila 3y ago

giarc 3y ago

I'm just seeing a bunch of #NAME errors.

santoshalper 3y ago
Same
mdrzn 3y ago
Click on the "Instructions" tab at the bottom of the page, you have to create a copy for your personal use. The #NAME errors is caused by the table trying to get data from a tab called "My RateSet" which doesn't exists yet.
deleted 3y ago
[deleted]

lotsofpulp 3y ago

TTTXX at BoA/Merrill is another one. Although, in a shit hits the fan scenario, I would expect to be able to access my FDIC insured account money more reliably than a money market fund.

7moritz7 3y ago

I don't see any reasons not to put everything into diversified ETFs. Low risk, reliably comparatively high returns unless the world economy or the entire US economy crash (which would ruin the value of almost every asset anyways).

dannyw 3y ago
Your emergency fund shouldn’t be in stocks.
dageshi 3y ago
What you suggest is comparatively high risk vs tbills and MM funds. T-bills are literally the safest possible investment bar none.
- giantg2 3y ago
  "T-bills are literally the safest possible investment bar none." Wouldn't I bonds be safest? They protect against inflation.
  - tallanvor 3y ago
    You can only buy $10k worth of I-bonds per year. But you're correct that I-bonds are designed to prevent you from losing money.
    - giantg2 3y ago
      Most people don't have $10k a year to invest anyways.
    - naniwaduni 3y ago
      You're still taxed on nominal gains on I bonds, so in principle you're still exposed to potential downside up to your tax rate. The way rates are set on I bonds is also unusually subject to tracking error.
  - trogdor 3y ago
    “Safe” in this context generally refers only to downside risk. T-bills are safer than I-bonds because T-bills are short-term investments. I-bonds have an early-withdrawal penalty. (I-bonds also have a $10,000 annual purchase limit, but that’s less-relevant.)

2OEH8eoCRo0 3y ago

Aren't money market funds only good today because of the high fed interest rate? If/when that comes back down so will the money market rates.

matthewaveryusa 3y ago
Higher than 0% yes. Historically rates are still on the low side. And yes they move with the fed rate.
Bluecobra 3y ago
Yes. When they start cutting rates that would be good time to buy Treasury Notes/Bonds or longer term CDs so you can lock in the interest rate for a period of time.
- naniwaduni 3y ago
  Expected rate cuts are generally already priced into longer-term bond prices, so trying to get in just before rates go down is basically exactly as hard as market timing.
anxrn 3y ago
And so will HYSA rates.

thesuitonym 3y ago

It's my understanding that high yield savings accounts are still the best place for an emergency fund. A tbill might net you more money, but if you're still 8 months from maturity, how does that help you at all?

NordSteve 3y ago
Sell the bill? Market is very liquid.
- nonethewiser 3y ago
  If you have to wait 2-3 days to get money your money its not an emergency fund.
  - ixwt 3y ago
    So putting my money into a HYSA isn't a good place for an emergency fund? It will take 2-3 days to transfer (without fees). I've never understood this mentality. I've got a credit card with nearly 6 months of expenses as a limit, most of it not used because I pay it off month to month. I'd be more worried about the tax implications of selling ETFs and such than the 2-3 days of wait to transfer. Maybe I lack imagination, but I can't think of anything that I'd need my entire emergency fund immediately. Throw the emergency cost onto a credit card, and transfer the money from the emergency fund to pay off the bill. I guess that doesn't work in some other countries where credit cards aren't as prolific as the US.
    - haswell 3y ago
      > It will take 2-3 days to transfer (without fees). This depends on the bank. If you have a checking account with the same bank, the funds can be available right away. The standard withdrawal frequency limits still apply.
      - abofh 3y ago
        Withdrawal limits on savings accounts were suspended for COVID, and at least in my experience, hasn't come back - but ymmv

HumblyTossed 3y ago

> but even better This is highly dependent on what the intended purpose of the money is.

roland35 3y ago

There comes a point where you are optimizing finances beyond what is necessary, in my opinion. Have a decent plan for your cash so it's earning good interest, then go out and focus your time on the rest of life. Automate as much as possible. Don't worry about a few $10s of extra interest!

rrrrrrrrrrrryan 3y ago
There are times when you need to have a ton of money in cash or near-cash (e.g. saving for a down payment for a first home), and then it makes a lot of sense to optimize. For a normal emergency savings fund, it does not make sense (unless you legitimately enjoy doing it!)
alemanek 3y ago
If your bank account is also at your broker (ex. Schwab, Fidelity) then money market funds are actually more convenient than a HYSA. My money market fund money is available the day after I sell and there is no waiting period to transfer between my accounts at Schwab. Also I can use the money market fund to underwrite cash secured puts or for other investment activities. Transferring between institutions I have had take 3-5 days before funds clear. Wires can be faster but come with fees and a whole bunch of questions to make sure you aren’t a scammer trying to empty an account. So, it is good to know about all your options. I keep my 6month emergency fund in SNOXX money market fund. With Fidelity you can set a sweep to go into their short term treasury fund and not even have to sell anything to transfer the money out.

soupfordummies 3y ago

I did some cursory reading on money market funds (MMFs) and I don't quite get the advantage if rates are roughly the same? For instance, if there is a high-yield savings account (HYSA) option that gives 5.3% interest and a MMF that gives 5.4% (with a 0.1% expense ratio), would I not receive the same amount of interest in practice? Not trying to disagree with you or anything, just making sure I understand the vehicle.

naniwaduni 3y ago
Usually, taxation differences. Also, MMF yields are generally quoted net of expense ratios already, you don't subtract them out a second time.
latchkey 3y ago
5.3% https://www.viobank.com/cornerstone-money-market-savings https://www.viobank.com/cornerstone-money-market-savings
balderdash 3y ago
From a practical standpoint they’re the same - it’s the at the margin (MMF is likely to “reset” more quickly than a high yield savings account, you’re also risking it “breaking the buck” in times of extreme stress, + a lot of the income in a MMF you won’t pay state tax on, on the other hand an HYSA is FDIC insured)

greyface- 3y ago

> tbills have a specified lock up period, like a month or more What is this referring to? I've bought and sold T-Bills in the same week, and have never encountered anything about a lockup.

balderdash 3y ago
I think they may be confusing it with savings bonds
sahila 3y ago
You’re right you can but/sell on the secondary markets easily. If you buy it directly on treasurydirect.gov, then you might have a lockup depending on the time interval you pick.

deleted 3y ago

[deleted]

3pm 3y ago

And there is a way to pay no taxes on the growth. You need to have 1) a tax advantaged account and 2) a regular brokerage with 2x your savings Technically tax is deferred or literally not paid if tax advantaged account is a Roth. https://www.bogleheads.org/wiki/Placing_cash_needs_in_a_tax-advantaged_account https://www.bogleheads.org/wiki/Placing_cash_needs_in_a_tax-...