VMMXX instead of HSBC savings?

[rerod]

I recently opened a online savings account with HSBC. I see I'm not the only one who isn't impressed with the web site or costumer service. But after doing so, I talked with a financial advisor who recommended I invest my savings into Vanguards Prime Money Market (VMMXX). This sounded good at that moment. But after thinking about it I was concerned that I was investing all of my savings into a mutual fund which was not FDIC insured. I have my retirement with TIAA CREF and a Roth IRA with vanguard already.

Is investing my savings into VMMXX risky? Should I continue with HSBC?

Thanks before hand.

[asmom]

Well I'm not as financially savvy as many of the posters here but yu already answered your own question about whether or not it was risky, of course it is. Also according to Vanguard's website, the fund has a 1 year return of 5.11% which puts it pretty darn near equal with HSBC. And for the 3-year return, it was 3.36% and 5-year 2.46%! There is something I'm not understanding, why did your financial advisor recommend this fund to you?

[rerod]

I guess after reading about his Experience. www.stevensoninvestments.com
I figured he knew what he was talking about and at that moment didn't question it. I paid him by the hour for the consultation.

He also recommended I went with 50% stocks and 50% bonds on my retirement for the moment since stock prices were over valued. I have not done this yet. But planned on it after Xmas.

[meaghanchan]

VMMXX is a pretty great choice for a savings account, and recently I moved all my emergency fund money there. Unlike a bank like HSBC, Emigrant, or ING, the rate isn't stable- it varies day to day based on market conditions (but usually in a very small range- I've been watching the fund for the past couple months, and it's been between 5.11 and 5.22%. We're all used to 4.5-5% interest because rates have been stable for the past couple years, but if you look back just 2 or 3 years, rates were more like 3-3.5%. If you look back further, they were lower. That's why the 5-year return on the fund is lower than what they're currently offering.

On your question of FDIC insurance: No major company's money market fund has ever defaulted. Does that mean that it could never happen in the future? No, but I'm confident enough that it won't that that's where I'm keeping my money.

[sweeps]

The Vanguard MMF is very good -- and it is extremely unlikely you would lose any money in it.

However, there are online savings accounts that pay a higher rate of return (and the FDIC insurance is icing on the cake).

Note there are a few other factors that could tip the balance toward the Vanguard MMF. If you have other accounts/funds at Vanguard, it could be enough to move you into Admiral status or at least reduce fees for maintaining minimum balances, etc. Also if you need an ultra-safe fund in your IRA, you'd have to choose a MMF over an online savings account. Finally, you get check-writing privileges that you may not necessarily get at online savings accounts (GMAC being a notable exception).

[Aleta]

I have had the Vanguard account for years and I move the money in and out according to other rates. I recently moved a larger portion out to the FNBO Direct bank because it's paying 6% and yes it is FDIC insured.

The rates change constantly with the mutual funds, but usually for the better. They have a 7 day rate change. The only difference is that in order to write a check, it must be for $250.00 and up, but that's OK if you're using it as a savings account. I just moved most of mine because of the 6% rate and the rate prior to the promotion was 5.25. That's higher than Vanguard's. I agree with most here that I wouldn't be too concerned about it not being FDIC.

I find it also easy to fund our retirement accounts in Vanguard by transferring the money from the Money Market. I use it like a cash management fund.

[rerod]

Thanks

I really dont have the time at the moment to play the savings account of the month game and move money around, back and forth. My savings is about 45K earning less than 3% at my local bank. My vanguard Roth is worth about 9K in the 2025 fund with $200 added per month. I will also move two IUTMA's with a combined value of 89K over to Vanguard mutual funds. So I could have around 143K invested with Vanguard.

If you were in my position. Where would you invest the 45K savings?

[meaghanchan]

I would (and did) go with the Vanguard Prime money market fund. No more chasing rates- just a great rate that's consistently within the top 5 MMFs. And it makes it easy to transfer to your other Vanguard investments.

[Ima saver]

I would go with the vanguard prime money market fund also.

[Aleta]

Getting higher rates depends on how much money you are investing. If it's a smaller amount, it doesn't make sense to go through all of that trouble. If you have a larger amount, getting a higher rate makes alot of sense. How do we know how long these rates are going to last. I've heard it hinted that the Fed might lower rates and if they do - that will affect the savers. You have to do what is best for you.

[parafly]

What's the problem with HSBC? It's FDIC insuranced, no fees, no minimums...it's a sure thing at a competitive rate. You mentioned that you plan to just park your money somewhere, so slow transfer times (biggest negative of HSBC online savings) should not be an issue at all.

[Ima saver]

There have been complaints about customer service.

[Aleta]

They are extremely slow in their transfer times and their customer reps aren't always that helpful.

[rerod]

Thanks again for every ones input. Iv decided to go with the prime money market. And will continue to invest what I can with Vanguard.