Money market fund fees

[WendyBG]

This is what @intercst calls “the skim.”

https://www.wsj.com/finance/investing/your-money-market-fund-is-ripping-you-off-660486a5?mod=hp_lead_pos8

Your Money-Market Fund Is Ripping You Off

If you’re taking comfort in cash these days, don’t feel too complacent. Your broker may be charging an arm and a leg for the privilege.

By Jason Zweig, The Wall Street Journal, May 2, 2025

Cash is king.

If only you didn’t have to pay a king’s ransom to hold it…

Money-market funds are surprisingly expensive, and a recent attempt to make them cheaper has been stymied. …

Since 2015, taxable and tax-free money-market mutual funds have grown by more than 150%, to $6.91 trillion…Over the same period, stock mutual funds (including international and balanced portfolios) grew to $16 trillion…

Meanwhile, annual expenses at money funds rose slightly to 0.21%…

Money-market mutual funds have traditionally been extremely safe and liquid, making them work well as a cash-management account for individual investors. They offer check-writing, electronic transfers in and out, and hardly ever generate capital gains or losses…

Across account types, Fidelity offers four default options for cash. Its Government Money Market and Fidelity Treasury mutual funds charge annual fees of 0.42% and yield 3.97% and 3.96%, respectively. Its two non-mutual-fund cash vehicles yield 2.19%… [end quote]

This is Fidelity’s auction schedule for new-issue Treasury bills. Fidelity does not charge a commission for T-Bills ordered at auction. (They do charge a commission for secondary market purchases.)

Obviously, a T-Bill is not cash. You can’t write a check on a T-Bill the way you can on a money market fund. But a 3 month T-Bill (which can be rolled over indefinitely) is cash-like in that it can be sold if necessary.

Wendy

[bjurasz]

I have $ VMRXX at Vanguard, currently expense ratio of 0.1% with yield of 4.24%.

[intercst]

Me, too.

It would be interesting to post the current interest rate below which you’re getting ripped off.

Since VMRXX is readily accessible to anyone, I’d say its 4.24%.

Vanguard has also been promoting a “Cash Plus Account” that gives you FDIC insurance on a balance of up to $1.25 million with a current yield of 3.65%. That’s a very generous skim rate to pay for the insurance. {{ LOL }}

I wonder if Vanguard Personal Advisors are counseling their clients to make the switch to “Cash Plus”?

intercst

[MarkR]

@WendyBG

Meanwhile, annual expenses at money funds rose slightly to 0.21%…

It’s absurd for me to pay someone 0.21% (or more!) to buy T-bills for me each week. Instead, for almost all my cash, I buy T-bills every Tuesday and Thursday (well, I place the orders every Tuesday and Thursday, the auctions take place on other days of the week). It takes about 60 seconds or so every Tuesday and every Thursday, so that’s not worth 0.21% (or more!) And they mature almost every day of the week, so there is constant cash available to pay all the expenses at almost a moments notice. So far, I have never needed to sell a T-bill early to cover an expense. I do leave a bit of a buffer in the brokerage money market account, but that’s also in case I see a good stock that I want to buy.