Don't want your 24% gain on the S&P 500 this year to slip away — but not sure where to put the cash if you sell? Sitting on cash you'd like to invest soon, but not now? You can get paid 4.6% essentially risk-free on this kind of money just sitting around.
A number of readily available money market funds, including Schwab Treasury Obligations Money Fund (SNOXX), Vanguard Treasury Money Market Fund (VUSXX) and Fidelity Treasury Only Money Market Fund (FDLXX), let you easily sock away cash in your brokerage account and score annual yields of anywhere from 4.4% to 4.8%. Since they own cash and very short-term government securities, the duration and credit risk is as close to zero as you'll find.
Best of all, there's no need to open an account to grab these yields on idle cash. You buy them using your existing brokerage just like any mutual fund. Some, though, like Schwab Treasury Obligations Money Fund is only available to Charles Schwab clients.
Why It's Worth Your Time?
There's a dirty little secret in the brokerage industry. If you have cash in your account, you're likely missing out of some big money. You're giving your brokerage a free loan with your cash.
Most brokerage accounts pay next to nothing on uninvested cash. That's a big deal now. Let's say you have $50,000 in cash in your account as you wait to find a stock to buy. If your brokerage pays 0.01% like many do, you're giving up more than $2,200 a year in interest easily obtained by a money market fund.
And it's an easy move to make.
What's A SNOXX?
With nearly $69 billion in assets, the Schwab Treasury Obligations Money Fund is one of the most popular fund of its type. It can be bought in Schwab accounts under the symbol SNOXX.
The fund is almost entirely held in cash or cash equivalents, says Morningstar Direct. Just 9.5% of the fund is held in very short-term U.S. government securities mostly rated AAA. Since it's a mutual fund, the money is made available quickly after you sell. The timing varies based on your account type and brokerage.
Schwab offers some other versions. The Government Money Fund (SNVXX) holds slightly less cash and cash equivalents than SNOXX: 83%. The rest goes mainly in short-term government securities. This changes pushes the yield up a bit to 4.5%. Then there's Vanguard's Treasury Money Market Fund (VUSXX), which yields 4.8%. Schwab does not offer a version of SNOXX in an ETF wrapper yet.
Know The Risk
It's important to note these funds' value per share remains fixed at a dollar. This steady value takes away risk of a capital loss.
Most of the funds are very similar, too. However, the fees do vary. SNOXX is at the higher end at a still reasonable 0.34%. Vanguard Treasury Money Market Fund charges just 0.09%.
These fees are important to pay attention to, though. They will add up over time. If you think you'll keep money in them for a prolonged period of time, you're likely better off putting your cash in a high-yield savings account.
Meanwhile, pay attention to any fees your brokerage might charge to buy the funds. One last warning: Make sure your brokerage isn't already putting uninvested cash in a money market for you automatically.
But overall, these funds can be a good place to park cash in your brokerage account until you're ready to invest it. Just don't wait too long.
Places To Park Your Brokerage Cash
| Fund | Symbol | Assets ($ billions) | TTM Yield | Expense |
|---|---|---|---|---|
| Vanguard Treasury Money Market Fund | VUSXX | $63.6 | 4.82% | 0.09% |
| Schwab Treasury Obligations Money Fund | SNOXX | 68.5 | 4.57% | 0.34% |
| Government Money Fund | SNVXX | 54.8 | 4.53% | 0.34% |
| Fidelity Treasury Only Money Market Fund | FDLXX | 4.6 | 4.43% | 0.42% |
| Schwab U.S. Treasury Money Fund | SNSXX | 52.1 | 4.42% | 0.34% |
