vanguard vs fidelity

[pugchief]

While perusing Fidelity's website, I also inadvertently stumbled onto a link that shows the routing information to PUSH money to the account. I know from a similar experience with Schwab, that there is no hold on pushed funds, only pulled. So I suppose another option would be to set up the push from the outside account to avoid the hold, but just another layer of pain-in-the-butt IMHO.

Speaking of Schwab, I have a brokerage account there as well with a linked "high-yield" (LOL 0.2%) checking account (linked means free overdraft transfers from the brokerage if needed). The default sweep in the brokerage account is an FDIC insured bank sweep also paying around 0.2%, and can not be changed. I can manually move idle cash to a MM fund paying 1.75%, but then the overdraft protection only works by paying the check by incurring margin debt in the brokerage account. Anyone who knows me would realize that I don't overdraw my account anyway, but you could use this feature (if it was available at Vg/Fido, and at one time it was at Schwab) to earn better rates on your money in the fund, and just keep the checking balance near zero since they would just pay the shortfall from the money fund without fees. So instead, I keep a few grand in the checking account to pay bills, and keep all of my shallow cash at Vanguard or an online savings account. Too bad, they are missing out on holding more of my money.

[sophie]

Fidelity now uses a select set of its money market accounts for core accounts, and you can pick the one you want & switch at will.

Their treasury-only MM isn't one of the options, but FZFXX is. Half of this is repurchase agreements, the other half is Treasuries. SEC yield is 1.4%. I wouldn't want to keep too much cash in there, but it's a nice alternative to the Ally savings account - especially if some of the interest is exempt from state/local tax. Anyone know if that's the case?

[pugchief]

Fidelity now uses a select set of its money market accounts for core accounts, and you can pick the one you want & switch at will.

Their treasury-only MM isn't one of the options, but FZFXX is. Half of this is repurchase agreements, the other half is Treasuries. SEC yield is 1.4%. I wouldn't want to keep too much cash in there, but it's a nice alternative to the Ally savings account - especially if some of the interest is exempt from state/local tax. Anyone know if that's the case?

That info is here: https://www.fidelity.com/bin-public/060 ... r_2017.pdf
It appears that a little more than half of the interest would be exempt from state taxes.

[barrett]

Fidelity now uses a select set of its money market accounts for core accounts, and you can pick the one you want & switch at will.

Their treasury-only MM isn't one of the options, but FZFXX is. Half of this is repurchase agreements, the other half is Treasuries. SEC yield is 1.4%. I wouldn't want to keep too much cash in there, but it's a nice alternative to the Ally savings account - especially if some of the interest is exempt from state/local tax. Anyone know if that's the case?

Beware of the .42% expense ratio on FZFXX though. Alas, with the ER taken into account at Fidelity, there are no great cash options... at least none that I have found so far.

[sophie]

Thanks pugchief!

After tax, this fund is very close to Ally's savings account. Nice. Taxes on interest is just hellacious. My little Lending Club experiment was a bit of a disaster because of this: it netted about $700 on my tiny experimental investment which sounds good until you realize that all but about $30 of it went to pay taxes.

And, now I know why Harry Browne advocated cash as the #1 candidate for tax-advantaged accounts. This is a good time to buy gold in taxable and convert gold ETFs in tax advantaged to T bills.

[Dieter]

Fidelity now uses a select set of its money market accounts for core accounts, and you can pick the one you want & switch at will.

Their treasury-only MM isn't one of the options, but FZFXX is. Half of this is repurchase agreements, the other half is Treasuries. SEC yield is 1.4%. I wouldn't want to keep too much cash in there, but it's a nice alternative to the Ally savings account - especially if some of the interest is exempt from state/local tax. Anyone know if that's the case?

Beware of the .42% expense ratio on FZFXX though. Alas, with the ER taken into account at Fidelity, there are no great cash options... at least none that I have found so far.

Vanguards Treasury MM (VUSXX) has .09% expense ratio. 50k minimum (which is why it doesn't show up in most lists; VG by default doesn't list funds with 50k+ minimums. I found it by accident -- Google search for why VG does NOT have a Treasury MM.... Hah! It might have had a lower minimum 10 years ago.)

Current yield of 1.77%

Just have $200k+ in your PP portfolio..

STT fund plus with other laddered cash another options. But possibky closest "pure" option outside of purchasing TBills yourself?

[stuper1]

If I understand correctly, you can start with $50k+ in VUSXX and then later drop well below $50k without any problem, as long as: (a) this is in a retirement account (e.g., IRA, Roth IRA, 401k), or (b) you have at least $50k of total assets invested with Vanguard. So, you could open a PP with just slightly over $50k in VUSXX and soon thereafter use 75% of the money to buy stocks/bonds/gold.

[pugchief]

So the T-bills I purchased are zero coupon, i.e., they were sold at a discount and mature at $1000 in 3 months. Does anyone know if you hold these over Dec 31/Jan1, is there imputed interest that tax has to be paid on, or how does that work tax-wise?

[sophie]

If I understand correctly, you can start with $50k+ in VUSXX and then later drop well below $50k without any problem, as long as: (a) this is in a retirement account (e.g., IRA, Roth IRA, 401k), or (b) you have at least $50k of total assets invested with Vanguard. So, you could open a PP with just slightly over $50k in VUSXX and soon thereafter use 75% of the money to buy stocks/bonds/gold.

Are you sure you can do that??

VUSXX is outstanding but alas not available at Fidelity. I didn't know it had reopened. If so, it's the best "online savings account" available!! But, it has to be possible for the balance to drop below the $50K minimum. Do you know if a employer retirement account at Vanguard counts toward the $50K total assets invested requirement?

[stuper1]

I'm not sure. I would think so if the employer account is held directly at Vanguard. I don't think it would apply if you held VUSXX through another brokerage.

[jhogue]

So the T-bills I purchased are zero coupon, i.e., they were sold at a discount and mature at $1000 in 3 months. Does anyone know if you hold these over Dec 31/Jan1, is there imputed interest that tax has to be paid on, or how does that work tax-wise?

The IRS taxes phantom income on zero coupon bonds annually. You can, however, buy zeroes in tax deferred accounts (which I have done), and their interest is not taxed by the federal government. Also, don't forget that regardless of what kind of account in which you hold them, T-bills are exempt from state and local taxes, which effectively increases their tax equivalent yield.

[pugchief]

So the T-bills I purchased are zero coupon, i.e., they were sold at a discount and mature at $1000 in 3 months. Does anyone know if you hold these over Dec 31/Jan1, is there imputed interest that tax has to be paid on, or how does that work tax-wise?

The IRS taxes phantom income on zero coupon bonds annually. You can, however, buy zeroes in tax deferred accounts (which I have done), and their interest is not taxed by the federal government. Also, don't forget that regardless of what kind of account in which you hold them, T-bills are exempt from state and local taxes, which effectively increases their tax equivalent yield.

That's what I thought, thanks. But if you hold them in a tax deferred account, you lose the state tax exemption. I guess I'll find out how complicated it is April 15. Usually, the big brokers make reporting pretty easy.