Hacker News Reader

Comment by 0cf8612b2e1e | Hacker News Reader

Who has the best interest rates for idle cash? I have been using Marcus, but it is not a huge burden to shop around.

I am a fan of fidelity. They have a cash management account with checking features. You can choose between a bank sweep at ~2.5% or a money market at almost 5%.

Edit: There are always non-checking accounts that do better than the above, but I think there is real value in focusing on your checking account -- if you have to move money back and forth to get good rates, is that worth the effort and what's the opportunity cost of the funds that sit in the low paying checking account.

For money markets, it's typically vanguard. Other brokers that are not bad for sweep include IBKR, Fidelity, Schwab, etc. But vanguard will always have higher interest on cash.

Marcus is FDIC insured savings though, which has slightly different implications. There's websites that compare current highest savings rates (nerdwallet, bankrate, whatever).

Going in the other direction, there are things like SGOV or Treasury-only money markets, if you live in a state that has higher income tax. Since the treasuries are exempt from state income tax.

Going even farther than that direction, there's muni bonds, funds, or money markets. At which point you're probably back to Vanguard for the best rates. (But again, not the same exact characteristics as a savings account)

You can also directly buy short term US treasury bills, which are paying roughly 5.25%, are auctioned weekly, have an extremely liquid secondary market, no fees, and essentially risk-free (backed by the US government).

> Going even farther than that direction, there's muni bonds, funds, or money markets. At which point you're probably back to Vanguard for the best rates. (But again, not the same exact characteristics as a savings account)

Yeah, very different product. Muni bonds are riskier than treasuries and much longer term than money market funds / treasury bills. E.g., VWSTX ("ultra short term muni") has an average maturity of over a year and 45% of portfolio is worse than AA. Vs VMFXX (money market) with an average maturity of 11 days and the entire portfolio is backed by the US government, which is essentially as good as it gets.

For the sake of completeness, it important to recognize that muni money market funds exist, such as VMSXX, VCTXX, and VYFXX.

My impression is that the current yields of these funds are not high enough to justify for most taxpayers, compared to other funds. But since everyone is different, it can be helpful to sit down and do the math for your individual situation.

https://thefinancebuff.com/best-vanguard-money-market-fund-y...

Agree in general, with minor caveats:

* Schwab's roboadvisor product has decent rates for cash sweep, but their self-directed brokerage has the rather weak rate of 0.45%.

* The first $10k at IBKR earns 0%. Also, IBKR Lite also has a weaker rate (3.83%) compared to IBKR Pro (4.83%).

Of course, with a bit of extra effort, you can buy SGOV etc. in your brokerage for better rates.

[1] https://www.schwab.com/cash-investments

[2] https://www.interactivebrokers.com/en/accounts/fees/pricing-...

It's hard to beat a decent money market fund.

But you want a MMF that is the sweep. Like Vanguard, but not Schwab.

Sure, there are some benefits to that. I happen to use Vanguard for this (VMFXX sweep).

Well I am glad I don’t see people writing about “high yield savings accounts” as often I see that copy pasted from old tutorials on basic investing.

Maybe I am wrong but I don’t think there were any “high yield” savings accounts for at least a decade or even more.

All savings accounts I see are mostly below inflation or around the same. Where high yield for me would be at least 1% or 2% above inflation.

Inflation is now below 3%. HYSAs are above 4% right now, so are beating inflation by a good margin.

Of course, changing interest and inflation rates can change that.

> Inflation is now below 3%

Officially.

In the long run you aren't going to be beating inflation by 2% with your cash or equivalent (CDs, treasuries, repo, whatever). That's in the 0-1% above inflation range, and likely on the lower end of that scale.

Even intermediate or longer term bonds struggle to get 2% real returns.

But yea, "high yield" is a misleading name for savings accounts, and there isn't a huge point to it now, especially after the liquidity rules on government money markets got tighter after dodd frank.

There is still one benefit to having at least a month or two of expenses in a savings account though - FDIC. In an emergency that also crashes your bank, FDIC turnaround is like one business day. SIPC exists for brokerage holdings, but it is glacially slow by comparison.

In HYSAs, SoFi gives you 4.6% if you direct deposit every month. The direct deposit doesn't need to be significant, just $1 is enough from what I hear (I do ~$50).

Discover bank and Apple bank are both above 4% for the last year.

Wealthfront Cash is 5%

Do note that their backing bank is greendot. If you sign up with a custom email address (eg: not gmail/yahoo/outlook/etc), your wealthfront account will still be created, but stopped from actually opening an account for failing verification.

As for verification goes, it's a black box from greendot's side[1].

[1]: https://www.reddit.com/r/wealthfront/comments/11t7k56/wealth...

That hasn't been my experience. My email is at my own domain, and I haven't had a problem. However I opened my wealthfront account many years ago.

Check out your local credit unions.

Local credit unions rarely are at the same level as HYSAs because they have physical infrastructure to maintain

Mine gives 4.75% APY, which seems to be in the ballpark as what others in this thread are discussing.

Reply on news.ycombinator.com