In my Vanguard account I've been gradually saving up cash for an eventual down payment on a home, and it's all currently in the Vanguard Prime Money Market fund (VMMXX).
When the balance was lower, I didn't care much that VMMXX was a non-ideal choice for PP cash. However, now that the balance has gotten larger--and given all the recent volatility in the markets--I'm thinking I should move it into Treasuries to be safe.
The two main options I'm considering are (1) buy a 1-year T-bill and roll it over every year, or (2) buy shares of SHV. I'm leaning toward the T-bill option since it's the safest, but since this cash is for a home down payment, I want to make sure it wouldn't be too much of a hassle if I need to sell the T-bill before it matures. Liquidity matters.
Have any of you sold a T-bill through Vanguard before it matured, and was it a fairly straightforward process? Did you get burned by any kind of unexpected bid-ask spread?
Selling T-Bills Before Maturity
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Re: Selling T-Bills Before Maturity
I think I've only sold notes, not bills, but it was as easy as selling stocks online, at both Vanguard and Fidelity. For whatever reason, I often got a bit less money than I thought I would according to my spreadsheet. Always a negligible amount.
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Re: Selling T-Bills Before Maturity
I hold T bills in a retirement account. They have occasionally showed up as losing a small amount during times when the T bill rate increased, so yes, I think you can lose a bit. However, if you sell, you won't get the price that shows up as "current value", you'll get whatever someone bids for it. I'd be a bit concerned about this for your downpayment savings.
If you can map out your timeline to buying a house, why don't you adjust your T bill maturities accordingly? Buy 1 year T bills until you're within a year from buying, then switch to 6 months, then 3 months, then 4 weeks. At that point you'll need to hold some of it in a bank account so you can come up with a 10% deposit when you're ready to sign a contract - trust me, if you find yourself bidding for a hot property, you will not have time to mess around with selling T bills. A four week holding time should be more than enough for you to claim the rest of it for closing. I have no idea how long a closing takes in your neck of the woods, but I expect it would be about a month at minimum. Around here it takes at least 3 months.
If you can map out your timeline to buying a house, why don't you adjust your T bill maturities accordingly? Buy 1 year T bills until you're within a year from buying, then switch to 6 months, then 3 months, then 4 weeks. At that point you'll need to hold some of it in a bank account so you can come up with a 10% deposit when you're ready to sign a contract - trust me, if you find yourself bidding for a hot property, you will not have time to mess around with selling T bills. A four week holding time should be more than enough for you to claim the rest of it for closing. I have no idea how long a closing takes in your neck of the woods, but I expect it would be about a month at minimum. Around here it takes at least 3 months.
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Re: Selling T-Bills Before Maturity
Or FDIC insured bank CD's?
Re: Selling T-Bills Before Maturity
Thanks for the suggestions, everyone.
Sophie, I like your idea of buying T-bills with shorter maturities as I approach the start of my house-hunting. I don't yet know exactly when that will be, but it definitely won't be within 6 months, so maybe that's the maturity I'll begin with.
Sophie, I like your idea of buying T-bills with shorter maturities as I approach the start of my house-hunting. I don't yet know exactly when that will be, but it definitely won't be within 6 months, so maybe that's the maturity I'll begin with.