Schwab Value Advantage Money Fund® – Investor Shares (SWVXX) in particular.

Paying 5.24% and was told insured up to $500K

Pros and Cons

I already have a Schwabb brokerage account.

https://www.schwabassetmanagement.com/products/swvxx

I keep everything in a jumbo CD. 9 months at 5.10 is what I believe the current one as being. I’m retired so no more gambling on the market. I don’t see it being 100% risk free but I don’t have one either.

I was at Schwabb last week and was told it was somewhat gauranteed right now at 5.24%, this is more like a CD from what I am seeing from what they invest "Invests in high-quality, short-term money market investments issued by U.S. and foreign issuers"

What is a Jumbo CD?

Does that mean you can put more than 250K in the bank and be gauranteed?

Jumbo’s are just a name for CD’s typically with a 100k minimum. They have the best rates. The FDIC 250K is the max insured for any bank. I’m not concerned with that. If a bank fails it gets bought by JPM type banks and they cover account amounts. I don’t know of a bank in my lifetime where anyone lost their money regardless of the amount.

Money Markets were great the last few years. My Edward Jones was averaging 16-18% but this year fell in its face. I pulled the money and bought rental properties.

Good to know about not loosing your money if a bank fails have exceeded the FDIC Limit.

What caused Money Markets to crash? High Interest rates?

Money markets weren’t paying $17%, that would have included a total market stock fund. The total market until recently has been growing 10-12% annually.

Money market accounts are just your holding account that you use to buy stocks out of. I’m with vanguard and they are paying 5.2% in their money market settlement account which is directly due to current interest rates.

You aren’t FDIC insured but they are SPIC insured.

https://investor.vanguard.com/investment-products/mutual-funds/profile/vmfxx

It sounds like Schwab is offering the same thing.

Half my retirement is sitting in a money market right now as an extremely low risk hedge to a market that doesn't know where it wants to go and is at an elevated risk level. I'll make interest on that money and then ladder into equities as either market goes down or risk moderates.

One upper thread

Exactly



Overall looks like a great deal, I don't see much downside and your money is pretty much liquid

So if your money is earning 5% and inflation is 6% vs your money being in equities and buying going on daily by Vanguard, Fidelity, etc.(at these deflated prices)….won’t you be 10 times better off on the upswing, which the market has always done? Or is the security thing the major factor?

Not losing is a play I call often.

What you call out is true, however, what about the losses the market has taken recently — how do you factor those in? It’s pretty easy to make up that 1% when you ladder back in. It’s a whole lot harder to make up the 10% loss. Just don’t try to time the market, instead make lots of fund transfers in chunks

Age being a primary factor; somewhere under 70; you can ride it out. 50 and under… no brainer, you’re 25 years out. Nearing 80, you better think about it. The market up and down over 3 years really doesn’t mean much to a young whippersnapper.

There is something about the structure of money market funds preventing them from being quite as liquid as we are led to believe. I just know that at the height of the so-called Great Financial Crisis of 07-08 a relative of mine couldn't get to their money market funds immediately. It was an uncomfortable time having to wait. There was concern about getting all of it back. However, they finally got it back, all of it. They just had to wait.

Here is a Friday article. Money market funds had a huge outflow. This outflow was from what I would call the "smart money." "The outflows were all from institutional funds (retail funds saw another inflow)..."

https://www.zerohedge.com/markets/money-market-fund-assets-crash-most-lehman

I work in the industry, and have for many years. Happy to answer some questions, but there are some things and topics I will not touch as well.

You arent wrong about money markets not paying 17%!

To clarify the second point - the industry has sort of gravitated towards calling cash holding accounts "money markets" as a catch all term , when they are not all the same. The two most common uses are money market accounts, generally held at a bank or a financial institution, having a somewhat limited withdrawal schedule (often a few times a month max) and paying a higher rate. These are sort of a cross between a savings account and a CD, will still be FDIC insured, and typically have in interest rate between those two options. Sometimes offering a check book, but normally NOT an investment product.

Some years ago, brokerage firms started offering these, and many offered these as a "Sweep" account - meaning that they eliminated the limited withdraw schedule, and had funds automatically move in and out of this cash holding account to cover trades and fund use - so it essentially acted like a higher yield checking account. This is still available with some firms, others have discontinued the practice.

The Money market asked about in the original post is a Money Market Mutual Fund (MMMF). MMMF's are buy in/sell out (in most cases, though I know some firms used these as a sweep in the past as well) and are just mutual funds that hold cash alternative and short term cash products to boost the interest rate. Typically short term CD's, treasuries, and other cash products, with a large % of those being FDIC insured, but the MMMF is NOT, they are securities, and as such, covered by the firms SIPC coverage (and any additional coverages). The holdings are all published information, and can be found on the firms websites (per regulations).

Most MMMFs also have a settlement time associated with them, just like a mutual fund, so if you sell one day, funds are often not available until the next day. The big benefit here is generally considered to be the low risk (FDIC insured and short hold terms of the underlying asset) and quick settlement times and movement ability (no short term holding penalties, commissions on trades, etc), with a good interest rate to go with it.

To Danny's point - the stuff that happened in 08 was on a different level, and had several different problems that culminated in some limits in withdrawals and other problems - not to mention that at least one firm had their money market fund break the buck, and that also caused some problems. This was a very interesting time to be in the industry, to be sure.

Yes Security it parmount important to me. Like my CD I can now get 5.60% and I don't have to worry about it or do anything for 13 months. Or I can get 5.25% for 7 months at at banks right down the road from me that I can walk into anytime I need.

Yes, at a certain point in life wealth preservation becomes important.

Have any of you looked into deploying funds into oil and gas mineral rights using a self-directed IRA? You have direct ownership of the minerals earning 12-20% cash on cash returns with monthly distributions.

Interesting

My father-in-law has been buying for about 2 years now. He found that he can use his trad. Ira to buy the minerals, hire a 3rd party to assess the property, then do a ROTH conversion for a 40-50% discount. So a $100,000 investment is only taxed on $50,000 then tax free after.

pm if you have any questions