How safe is Vanguard Money Market Fund?
At least 99.5% of their assets are backed by the full faith and credit of the U.S. government. While money market funds aren't FDIC-insured, investments held in brokerage accounts (including money market funds) may be insured by SIPC.
Money market funds and other securities held in the Vanguard Brokerage Account are eligible for SIPC coverage. Securities in your brokerage account are protected up to $500,000. To learn more, visit the SIPC's website. Up to $250,000 by FDIC insurance.
| Money market fund | Expense ratio | 7-day SEC yield |
|---|---|---|
| North Capital Treasury Money Market Fund (NCGXX) | 0% | 5.4% |
| Schwab Municipal Money Fund - Investor Shares (SWTXX) | 0.34% | 3.3% |
| Vanguard Ultra-Short Bond ETF (VUSB) | 0.10% | 5.1%* |
| Global X 1-3 Month T-Bill ETF (CLIP) | 0.07% | 5.2%* |
The securities that underlie the funds are held by a custodian, not by Vanguard. Vanguard is paid by the funds to provide administration and other services. If Vanguard ever did go bankrupt, the funds would not be affected and would simply hire another firm to provide these services.
Rest easy knowing the cash in your Vanguard Cash Plus bank sweep is eligible for FDIC coverage up to $1.25 million for individual accounts and $2.5 million for joint accounts.
Can I lose money when I invest in money market funds? Yes. Although money market funds seek to maintain a stable $1 share price, capital preservation is not guaranteed.
About Vanguard
Vanguard's mission is to "take a stand for all investors, to treat them fairly, and to give them the best chance for investment success."6 It prides itself on its stability, transparency, low costs, and risk management.
Vanguard Treasury Money Market Fund
This fund only invests in US Treasuries and repurchase agreements insured by the federal government, making it among the safest in a category of relatively safe investments.
However, this only happens very rarely, but because money market funds are not FDIC-insured, meaning that money market funds can lose money.
The Bottom Line. Both money market accounts and money market funds are relatively safe, low-risk investments, but MMAs are insured up to $250,000 per depositor by the FDIC and money market funds aren't.
Is Vanguard at risk of failing?
First, the chances of Vanguard failing are miniscule. That said, let's talk about brokerage accounts for a minute. Brokerage accounts are not backed by the FDIC but by the Securities Investor Protection Corp (SIPC), which protects accounts up to $500,000.
Vanguard is paid by the funds to provide administration and other services. If Vanguard ever did go bankrupt, the funds would not be affected and would simply hire another firm to provide these services.
Vanguard is the king of low-cost investing, making it ideal for buy-and-hold investors and retirement savers. But beginner investors and active traders will find the broker falls short despite its $0 stock trading commission, due to the lack of a strong trading platform and accessible educational resources.
The truth is that either broker is suitable for a long-term investor, depending on one's needs. Vanguard could be a better choice for passive investors who want index funds; Charles Schwab offers more features that appeal to active investors. Ultimately, the better brokerage is dependent on how you invest.
The benefits of investing at Vanguard
Whether you're saving for college, retirement, or other goals, investing at Vanguard gives you access to varying levels of support. Choose from a wide range of investment products—such as mutual funds, ETFs (exchange-traded funds), stocks, and more—all for a low cost.
While Fidelity wins out overall, Vanguard is the best option for retirement savers. Its platform offers tools and education focused specifically on retirement planning.
When the value of the fund goes below $1, however, it's said to break the buck. Even though this is a rare occurrence, it can happen. Breaking the buck generally signals economic distress because money market funds are considered to be nearly risk-free.
| Fund | Expense Ratio | 7-day SEC yield |
|---|---|---|
| Vanguard Municipal Money Market Fund (VMSXX) | 0.15% | 3.3% |
| Fidelity Money Market Fund (SPRXX) | 0.42% | 5.0% |
| Schwab Value Advantage Money Fund - Investor Shares (SWVXX) | 0.34% | 5.2% |
| BlackRock Wealth Liquid Environmentally Aware Fund (PINXX) | 0.49% | 5.0% |
Though not quite as safe as cash, money market funds are considered extremely low-risk on the investment spectrum.
| Vanguard Fund | Expense Ratio |
|---|---|
| Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) | 0.04% |
| Vanguard Explorer Fund Investor Shares (VEXPX) | 0.45% |
| Vanguard Long-Term Treasury Index Fund Admiral Shares (VLGSX) | 0.07% |
| Vanguard Mid Cap Growth Fund (VMGRX) | 0.37% |
What are the cons of Vanguard?
- Relatively high minimum investment requirements for many fund options.
- Higher-than-average per-contract options fee.
- Slow process to open an account.
- No trading platform for active traders.
- No fractional shares of stocks or ETFs.
Best Vanguard Funds for Aggressive Investors: Vanguard Explorer (VEXPX) Click to Enlarge If you want to turn up the growth potential and you want to go all-the-way aggressive, look no further than Vanguard Explorer (MUTF:VEXPX).
Money market funds can protect your assets during a recession, but only as a temporary fix and not for long-term growth. In times of economic uncertainty, money market funds offer liquidity for cash reserves that can help you build your portfolio.
Vanguard Federal Money Market Fund (VMFXX)
The investment minimum is $3,000, and the fund has a 0.11% expense ratio. Nearly 100% of the fund's total assets go into a combination of cash, U.S. government securities and repurchase agreements that are collateralized by the U.S. government or cash.
Investors who want to concentrate on mutual funds and long-term investments will find a lot to like about Vanguard. They'll also save some money in the process. Highly active investors or those taking complicated positions will prefer Charles Schwab, particularly its StreetSmart brand.
