Park Cash In Money Market Funds Or T-Bills | Fidelity's SPAXX, Schwab's SWVXX & Vanguard's VMFXX
📚 Main Topics
- Comparison of Money Market FundsAnalyzing top funds from Fidelity, Schwab, and Vanguard in terms of yield and tax treatment.
- Preference for T-BillsDiscussing reasons for favoring T-Bills over money market funds for parking excess cash.
- Considerations for Investment ChoicesFactors to consider when choosing between T-Bills and money market funds.
✨ Key Takeaways
Money Market Fund Comparison
- Fidelity offers several money market funds (SPAX, FZFXX, FDRXX, FDLXX, FZDXX) with varying yields and tax implications.
- Schwab's funds (SWVXX, SNVXX, SNOXX, SNSXX) have eliminated automatic sweep features, requiring manual buy/sell orders.
- Vanguard's funds (VMFXX, VMRXX, VUSXX) include a core fund that automatically sweeps excess cash.
Tax Treatment
- Interest from T-Bills is exempt from state and local taxes, making them more favorable for residents in high-tax states like California, Connecticut, and New York.
- Money market funds may not provide the same tax benefits, especially in these states, unless they meet specific investment criteria in U.S. government securities.
Yield Considerations
- T-Bills currently yield between 4.5% and 4.6%, which is generally higher than many money market funds.
- The yield is not the only factor; the percentage of income exempt from state taxes can significantly affect net returns.
🧠 Lessons
- Investment StrategyThe choice between T-Bills and money market funds should consider individual tax situations, investment goals, and liquidity needs.
- Account Type MattersThe type of account (taxable vs. retirement) can influence the tax implications of both T-Bills and money market funds.
- Automation and SimplicityMany investors prefer the automation of money market funds for ease of access, while others may prioritize the higher returns of T-Bills despite the need for more active management.
🏁 Conclusion
Choosing between T-Bills and money market funds is not straightforward and depends on various factors including yield, tax implications, and personal investment preferences. Investors should evaluate their unique circumstances and consider consulting a tax advisor for tailored advice.
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 eade fans on our channel in this section I'll also let you know which ones you can and cannot buy via your eade 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
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