Consumerism Commentary - Latest Comments in Considering Tax-Exempt Money Market Funds

Re: Considering Tax-Exempt Money Market Funds

Harlan Landes — Tue, 11 Nov 2008 01:57:19 -0000

Doug: Yes the interest rate of this tax-exempt money market fund has dropped dramatically since the beginning of October.

Re: Considering Tax-Exempt Money Market Funds

Doug — Tue, 11 Nov 2008 01:18:09 -0000

Am I missing something? I just Vanguard's rate on their Tax Exempt Money Market account and it is listed at 1.54 average 7-day annualized (11/10/2008). Have the rates dropped that much since October?

Re: Considering Tax-Exempt Money Market Funds

Concernedinvestor — Thu, 09 Oct 2008 00:54:23 -0000

I invested in Dreyfus Preferred New Jersey Tax Exempt Bond fund. The fund has dropped big time and I have lost
thousands of dollars I am considering cutting my loses...before I lose more money. While I had planned to stay in the
fund for a short time I had not expected to remain in this fund for years....it seems to me that now I would have to
remain in for a longer term of years and hope that the fund comes back up. Now I am worried that the fund will drop
even lower and I will lose additional thousands...While I am in a high tax bracket and the tax exempt fund has been
yielding around 3% yields I am seeing my principle falling.

Why I keep asking myself is the fund dropping? Are people selling in a panic? Are they worried that the towns will not
pay their debt? Any suggestons? Thx

Re: Considering Tax-Exempt Money Market Funds

Jared — Tue, 07 Oct 2008 03:43:04 -0000

#1: Timing the market is a sucker's bet. It might be fun, but don't fool yourself - you're not investing, you're gambling. In an earlier post you asked "Is it too risky to try to time the market right now?" The answer is - it's never a good time to try to time the market. Buy and hold.

#2: Costs matter. By buying and selling index funds through an ETF you're significantly reducing your returns through transaction fees and short-term capital gains taxes. As John Bogle says, you're "frustrating the original purpose of the index strategy - efficient long-term investing in a diversified portfolio of businesses - giving [you] instead a vehicle for short-term speculation in the stock market."

Re: Considering Tax-Exempt Money Market Funds

Finance Junkie — Sun, 05 Oct 2008 23:14:56 -0000

Flexo,

You should give the ETF "VTI" a look. It's also a Vanguard total stock market etf and has half the annual expense of the one you're in.

Re: Considering Tax-Exempt Money Market Funds

Harlan Landes — Sat, 04 Oct 2008 09:11:16 -0000

SavingEverything: That is true for all funds, the money market yields are after fees.

Re: Considering Tax-Exempt Money Market Funds

SavingEverything — Sat, 04 Oct 2008 09:00:15 -0000

Isnt it true that the rate that Vanguard posts for money market funds are "NET of all the funds' expenses fees"??? How about the same for Fidelity, TRowe, and others?

Re: Considering Tax-Exempt Money Market Funds

Keith — Fri, 03 Oct 2008 21:31:44 -0000

Those yields are tantalizing, but as you know, your money is not guaranteed under the FDIC. This makes me a bit nervous right about now and I might be inclined to stick to my 2.65% money market account.

I thought that the government guarantee might make it a no brainer, but as you can see, you would have had to put your money into the fund prior to 9/20/2008:

****All the Funds intend to apply to be insured under the program. Under the program, the U.S. Treasury will guarantee investors $1.00 per share for each share held on September 19, 2008 of any eligible money market mutual fund that participates. The program will last until December 18, 2008, after which the U.S. Treasury may elect to extend it for an additional period, but not beyond September 18, 2009. The guarantee under the program could be triggered if a Fund's net asset value falls below $0.995, commonly referred to as breaking the buck.****

I'm still scared for the worst right now. Maybe you can set my mind at ease about these, because the actual yields are tremendous.

Re: Considering Tax-Exempt Money Market Funds

nkage487 — Thu, 02 Oct 2008 21:02:26 -0000

Just for everyone's info, when you make a non-recurring electronic purchase into a Vanguard mutual fund, any trade entered prior to 10 pm receives the next day's trade date (and price).

I happened to get lucky twice in a row now - my automatic investment gets a trade date of every other Monday, so my last two purchases have both gone in after enormous drops that were mostly recovered the next day :-)

Re: Considering Tax-Exempt Money Market Funds

Harlan Landes — Thu, 02 Oct 2008 12:42:17 -0000

The problem with some money market funds recently was their underlying investments. Rather than corporate bonds, the investments behind the money market funds that "broke the buck," VNJXX invests in municipal securities, and only those that are highly-rated. So there is risk, but it's a bit different than the money market funds cited in the news recently. The risk is prrimarily based on the state's financial condition -- which is never *good* as far as I can tell, but it should be relatively stable.

Re: Considering Tax-Exempt Money Market Funds

Kevin — Thu, 02 Oct 2008 12:12:08 -0000

This NY Times article (http://tinyurl.com/4fxrzp) outlining the crisis mentions money market funds. There was apparently a big run on money market funds. Do you think they are still safe? I don't have enough expertise to tell you whether or not they are, but thought it was good food for thought.

Re: Considering Tax-Exempt Money Market Funds

Harlan Landes — Thu, 02 Oct 2008 11:57:34 -0000

Josh: Since Washington does not have an income tax, you're already a little better off even with taxable savings. You could invest in Vanguard's Tax-Exempt Money Market (VMSXX), which is exempt from federal income tax only. As of today this fund's 7-day yield is 5.83%.

Re: Considering Tax-Exempt Money Market Funds

Josh — Thu, 02 Oct 2008 11:40:30 -0000

Wow, I wonder if there is any similar investment option available for residents of Washington State.

Re: Considering Tax-Exempt Money Market Funds

Andy — Thu, 02 Oct 2008 09:50:32 -0000

These yields are amazing espically if you are in the 25% tax bracket and above. I just moved my cash sitting on the sidelines to the Vanguard tax exempt money market fund. 7.5% equivalent yield with a low 0.17% management fee. Can't beat that in today's market.