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Frequent Contributor

Vanguard Prime M-Mkt Fund Changing

From VG email:

"Vanguard Prime Money Market Fund (Investor Shares: VMMXX; Admiral™ Shares: VMRXX) will change its investment strategy and be renamed Vanguard Cash Reserves Federal Money Market Fund. When this change goes into effect in late September 2020, the fund will invest almost exclusively in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash. The fund has historically been managed more conservatively than its peer group. For example, Vanguard Prime Money Market Fund maintained a 33% allocation to government securities—in contrast to the industry average of less than 3%*—leading into the sharp volatility of March 2020. The change in investment strategy further lowers its risk....."

Question is why also keep VG Federal M-Mkt Fund that is used now as core/settlement fund?

Website link has more details: Admiral VMRXX min reduced but no checkwriting; Treasury VUSXX reopening.   https://investornews.vanguard/changes-to-our-taxable-money-market-fund-lineup/

"Existing Investor share owners (VMMXX): You have the option to immediately convert† to Admiral Shares to begin taking advantage of the lower expense ratio. You can find simple step-by-step instructions here. If you don’t initiate a conversion, you’ll be automatically converted sometime between late 2020 through 2021. Note: Our checkwriting service isn’t available for the fund’s Admiral share class. Checkwriting is available for Vanguard Federal Money Market Fund and other Vanguard money market funds."

YBB
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Frequent Contributor

Re: Vanguard Prime M-Mkt Fund Changing

VG M-Mkt fund ERs and minimums [notable features]:

Prime-Investor VMMXX  0.16%, $3K [can be converted to VMRXX if balance $3K+] [check writing until conversion] [name & policy changing]

Prime-Admiral VMRXX  0.10%, $3K [lowered] [no check writing] [name & policy changing]

Federal VMFXX  0.11%, $3K [also core/settlement] [check writing]

Treasury VUSXX  0.09%, $50K [reopened]

YBB
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Contributor ○

Re: Vanguard Prime M-Mkt Fund Changing

Yogi.....It is my understanding that at present Vanguard is waiving the prime money market fund's expense.  So would it be prudent to wait until Vanguard converts the fund to the Admiral shares and be able to continue to have check writing ability. If you convert now than you lose check writing.  Am I correct?

Gabe

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Re: Vanguard Prime M-Mkt Fund Changing


@youth wrote:

Yogi.....It is my understanding that at present Vanguard is waiving the prime money market fund's expense.  So would it be prudent to wait until Vanguard converts the fund to the Admiral shares and be able to continue to have check writing ability. If you convert now than you lose check writing.  Am I correct?

Gabe


Expense waiver is just enough to keep 7-day SEC yield tiny bit above 0%.

7-day SEC yields: VMMXX 0.04%, VMRXX 0.10%.

I also have check writing for Prime VMMXX in my taxable VG a/c, but I also have Federal VMFXX [w/o check writing]. I don't use VG check writing - haven't used it for years. But it is a nice feature to keep as long as possible. So, I shifted funds so that VMMXX balance is under $3K and it is out of conversion eligibility for now [manual or auto]. If I write a check, I will transfer just enough to cover the check. 

You can also add check writing to Federal VMFXX.

BTW, when I established bank link, I thought that I was doing it for VMMXX, but the way VG did it, bank link works for all VG fund holdings. So, VG check writing isn't essential for me.

I still have VG mutual fund accounts. Things may be different for VG Brokerage accounts.

YBB
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Contributor ○

Re: Vanguard Prime M-Mkt Fund Changing

Yogi:  Thank you for your immediate response.  

Gabe

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Follower ○○

Re: Vanguard Prime M-Mkt Fund Changing

I have both Federal MM and Prime MM.  I use the Federal MM for check writing and the Prime MM as the alternative redemption fund (in case there isn't enough $$ in the Federal MM).  

The NEW Prime MM can't be used as the alternative redemption fund.  You can still have an alternative redemption fund - it just needs to be another approved fund.  

bcc

ps - I converted to the Admiral Shares today and won't have an alternative fund.

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Frequent Contributor

Re: Vanguard Prime M-Mkt Fund Changing

Yogi

From your post, I understand that bank links will work with VMFXX. Will VG move my settlement fund to something else? I do not need to worry about their interest. I need only the conveinece of moving money back and forth.

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Re: Vanguard Prime M-Mkt Fund Changing


@ECEPROF wrote:

Yogi

From your post, I understand that bank links will work with VMFXX. Will VG move my settlement fund to something else? I do not need to worry about their interest. I need only the conveinece of moving money back and forth.


Federal VMFXX [also VG core/settlement fund] is not affected and bank link should continue to work; its checkbook is also not effected.

Only Prime VMMXX and the associated checkbook will eventually go away.

YBB
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Frequent Contributor

Re: Vanguard Prime M-Mkt Fund Changing


@yogibearbull wrote:

@ECEPROF wrote:

Yogi

From your post, I understand that bank links will work with VMFXX. Will VG move my settlement fund to something else? I do not need to worry about their interest. I need only the conveinece of moving money back and forth.


Federal VMFXX [also VG core/settlement fund] is not affected and bank link should continue to work; its checkbook is also not effected.

Only Prime VMMXX and the associated checkbook will eventually go away.


Is there any good reason to keep cash in prime money market, VMMXX now? I used to use prime money market exclusively. 

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Re: Vanguard Prime M-Mkt Fund Changing


@yogibearbull wrote:

@ECEPROF wrote:

Yogi

From your post, I understand that bank links will work with VMFXX. Will VG move my settlement fund to something else? I do not need to worry about their interest. I need only the conveinece of moving money back and forth.


Federal VMFXX [also VG core/settlement fund] is not affected and bank link should continue to work; its checkbook is also not effected.

Only Prime VMMXX and the associated checkbook will eventually go away.


I do not keep money there. I move the cash to First Tenn. HELOC so that I pay less interest there. Sometimes, when I find a deal, I need move the cash back. So, it works out fine for me.

In any case, thanks.

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Re: Vanguard Prime M-Mkt Fund Changing

I spoke to a Vanguard Rep re:  further clarification in terms of converting to admiral shares immediately vs. waiting until Vanguard converted it .  The goal was to keep my checking account until the conversion .  

Interestingly, the Rep was not apprised by Vanguard Administration re:  this policy change.  He apologized profusely.

Personally I see no benefit of the switch to admiral since Vanguard waves the 16 basis points currently with respect to the Prime Money Fund.

I like the checking privilege and so I will hang on until I am switched  by Vanguard.

Gsbe

 

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Explorer ○

Re: Vanguard Prime M-Mkt Fund Changing

I owe this fund and federal too. Maybe someone can explain to me what impact it has beside check writing? I only use it to park my emergency fund and not invest at all. I use BOA for all my banking.

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Explorer ○

Re: Vanguard Prime M-Mkt Fund Changing

The "no check writing" factor ticks me off. My wife and I have owned VMMXX since the early 1990s, and have always used it for larger-denomination payments (property taxes, etc.). We have been keeping an even larger-than-usual amount in cash there recently as we hunt for a retirement-worthy house, so we can write a single check for purchase if necessary. Have not yet been notified by email or snail mail of the impending change, but if they don't have a seamless and no-tax-exposure suggestion for us to maintain money market investment with check-writing capability, I'm going to give my Admiral representative an earful.

Steaming just a tad...

Dirk

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Re: Vanguard Prime M-Mkt Fund Changing


@youth wrote:

I spoke to a Vanguard Rep re:  further clarification in terms of converting to admiral shares immediately vs. waiting until Vanguard converted it .  The goal was to keep my checking account until the conversion .  

Interestingly, the Rep was not apprised by Vanguard Administration re:  this policy change.  He apologized profusely.

Personally I see no benefit of the switch to admiral since Vanguard waves the 16 basis points currently with respect to the Prime Money Fund.

I like the checking privilege and so I will hang on until I am switched  by Vanguard.

Gsbe

 


I also don't see any benefit of switch to Admiral VMRXX and will do fine with Federal VMFXX instead. I may add check writing to Federal VMFXX later, but for now, I have bank links and I can use other checks.

BTW, there is no fee waiver at Vanguard for VMMRX and its 7-day yield of 0.04% is net of ER of 0.16%. I looked for fee waiver statement at VG website and in prospectus supplement but didn't find any.

Fido, Schwab, TIAA, etc have done fee waivers for their m-mkt funds to keep their yields barely positive; their ERs were much higher [0.35% or more].

YBB
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Contributor ○

Re: Vanguard Prime M-Mkt Fund Changing

Yogi:

You will find the waiver of the ER in an article in The Philadelphia Inquirer dated July 24 2020.  Google it!

Gabe

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Re: Vanguard Prime M-Mkt Fund Changing


@youth wrote:

Yogi:

You will find the waiver of the ER in an article in The Philadelphia Inquirer dated July 24 2020.  Google it!

Gabe


I am familiar with that article. It talked about fee waiver for VG PA Muni M-mkt fund only, and also for m-mkt funds by other families. No mention of VG Federal VMFXX and VG Prime VMMRX [that you mentioned]. Please Google again.

YBB
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Re: Vanguard Prime M-Mkt Fund Changing

Yogi:  I reread that article once more and I came up with the same conclusion.  So....I will set it aside.  Thanks for your input.

Gabe

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