Park Cash In Money Market Funds Or T-Bills | Fidelity's SPAXX, Schwab's SWVXX & Vanguard's VMFXX
📚 Main topics
- Comparing money market fundsThe video compares Fidelity, Schwab, and Vanguard money market funds by seven-day yield, core-fund and automatic-sweep features, and the portion of income from U.S. government obligations that may be exempt from state and local taxes. It also explains which funds can be bought through an E*TRADE account. 1:02
- T-bills versus money market fundsThe speaker compares T-bill yields and tax treatment with money market fund dividends, focusing on the choices available to investors holding cash in taxable brokerage accounts. 11:32
- Other factors to weighThe best option can also depend on state of residence, account type, desired liquidity, and comfort with buying and laddering T-bills. 13:36
✨ Key takeaways
- Fund features varyFidelity SPAXX and Vanguard VMFXX are core settlement funds with automatic cash sweeps; the other funds discussed generally require an explicit purchase, though Fidelity can draw from non-core funds when cash is needed for a trade. Schwab’s funds are not automatic sweep options. 2:05
- Tax treatment depends on the fund and stateSome money market fund income may qualify for state and local tax exemptions, but California, Connecticut, and New York have specific requirements. The video notes that Fidelity FDLXX, certain Schwab funds, and Vanguard VUSXX may offer substantial qualifying income. 5:14
- T-bills can have an after-tax advantageThe speaker says their T-bill ladder yields about 4.5%–4.6% and that T-bill interest is exempt from state and local income taxes, while remaining subject to federal income tax. 11:32
- Convenience is valuable tooThe speaker keeps some cash in SPAXX for automatic access to funds for emergencies or investment opportunities, despite preferring T-bills for much of their cash. 13:04
🧠 Lessons learned
- Compare after-tax returnsA higher stated yield does not necessarily mean more money after taxes. Consider the fund’s eligible government income and your state and local tax situation. 10:29
- Account type changes the tax comparisonIn retirement accounts, the tax treatment of money market funds and T-bills is generally governed by the account’s distribution rules, making the taxable-account comparison less relevant. 14:08
- Match the choice to your needsMoney market funds may suit investors who prioritize liquidity and ease, while T-bills may appeal to those comfortable managing a ladder and seeking state and local tax exemption. A combination is also an option. 14:38
🏁 Conclusion/next steps
- Choose based on your circumstancesConsider yields, taxes, liquidity, and how much automation you want before deciding where to park cash. The speaker invites viewers to share whether they prefer T-bills, money market funds, or both. 15:08
- Learn more about fixed incomeThe video points viewers to the channel’s bond-course resources and upcoming live sessions for help getting comfortable with buying and laddering Treasury securities. 15:08
Transcript excerpt
0:00 would you earn more money parking your cash in t- bills or your money market fund hello member super Savers and bond course fans I hope you're healthy and well you sent a lot of t- Bill versus money market fund questions our way after we posted this recent cash versus money market funds video link below for those of you who need a refresher so let's answer some of those questions today and specifically here are the three topics that we'll be covering in
0:31 today's video One how do the top Fidelity Schwab and Vanguard money market funds that interest our Diamond nestate Community compare in terms of yield and tax treatment for the E*TRADE fans on our channel in this section I'll also let you know which ones you can and cannot buy via your E*TRADE account online two why do we generally prefer to park our excess cash in t- Bills versus money Market funds and three what other
1:02 factors might you want to consider as usual here's our front of video disclaimer for a detailed disclaimer please refer to the end of this video Let's dive in now folks and answer the question of t- Bills versus money market funds which one might be better for you because the answer isn't as straightforward as it may seem let's start in alphabetical order and first go through the five Fidelity money Market funds that our community talked about the most in the comment
🔒 The full, searchable transcript is available with Pro.
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