The US interest rates have been stubbornly high for more than 18 months. In the past, I looked for high-yield savings account or Certificate of Deposits (CD). I put most of my cash in CDs. Lesson learned - annual return was only about 5% and money was parked and locked in the CD accounts until accounts matured. When there was opportunity to invest in a dividend-paying stock, I had no good cash available on-hand.
Fast-forward to the year 2024. I found an almost equivalently CD-safe altenartive - high-yield money market funds offered by Charles Schwab - Schwab Prime Advantage Money Fund (SWVXX) and Schwab Prime Advantage Money Fund - Ultra Shares (SNAXX). The money market funds are more risky than CD, yet can become available to you after one business day.
Collecting 5% interest by simply waiting was quite appealing and effortless, until the one-business day delay waiting requirement started to point to the opportunity loss to be able to bottom-fish stock equities. In late 2023, looked into money market funds offered by Vanguard Brokerage, as I like Vanguard mutual funds and ETFs.
In my opinion, Vanguard money market funds are the most appealing, because of
- the funds' low fee
- the high interest rate return
- the immediate availability of the money to invest in stock equities - no 1-day wait requirement
- by default, cash in Vanguard Brokerage account is deposited into Vanguard Federal Money Market Fund automatically.
- Say you have $5k in your Vanguard Brokerage Account. By default, the money is automatically into Vanguard Federal Money Market Fund.
- On Day 1, you do not know what to buy, thus simply earn interest.
- On Day 2, you are interested to purchase $2k of ABC shares. In Vanguard, the Federal Money Market Fund would be available to you on the same business day.
No comments:
Post a Comment