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Thursday, June 04, 2009

Vanguard to Close and Merge Funds to Preserve Yield for Current Shareholders

To preserve competitive yields in its money market funds, Vanguard will merge its Vanguard Admiral Treasury Money Market Fund (VUSXX) and Vanguard Treasury Money Market Fund (VMPXX).
To protect current shareholders from dilution of yield that comes from new deposits, Vanguard also closed its "Vanguard Federal Money Market Fund" on June 2. The decision to close the fund was made "to protect the interests of current fund shareholders by limiting the fund's need to purchase new short-term federal agency securities that offer negligible yields."
The merger of Vanguard Treasury Money Market Fund, which has an expense ratio of 0.28%, into Admiral Treasury Money Market Fund, with its lower expense ratio of 0.15%, will reduce expenses for Treasury fund shareholders. After the merger, the fund is expected to maintain its expense ratio of 0.15%. Additionally, reducing new cash flow into the Vanguard Federal Money Market Fund may slow the decline of that fund's yield.
For similar reasons, Vanguard Admiral Treasury Money Market Fund and Vanguard Treasury Money Market Fund were closed to new accounts on January 26, 2009.

Vanguard Admiral Treasury Money Market Fund (VUSXX)
Closed to new investors
Category = Taxable Money Market
Expense ratio as of 12/29/2008 = 0.15%
SEC yield as of 06/03/2009 = 0.18%
Vanguard Treasury Money Market Fund (VMPXX)
Closed to new investors
Category = Taxable Money Market
Expense ratio as of 12/29/2008 = 0.28%
SEC yield as of 06/03/2009 = 0.05%
Vanguard Federal Money Market Fund (VMFXX)
Closed to new investors
Category = Taxable Money Market
Expense ratio as of 12/29/2008 = 0.28%
SEC yield as of 06/03/2009 = 0.34%
If you have less than a few million dollars to invest, I would look to invest in 6 month to 2 year CDs to get much better yield with FDIC and NCUA protection spread between several banks and credit unions.

For example, the 1-year US Treasury note is only paying 0.46% but you can get a 1-year CD at Ally Bank (formerly GMAC Bank) that pays 2.80%.

More Information about CD Rates:
  • Page three of our newsletter, The Retirement Advisor, has a monthly summary of what is happening in the world of CDs, a popular feature titled "Maximizing the Returns On Your Cash" and a table of the best CD rates with links to web sites.

  • See "Very Best CD Rate Survey" to get an idea what the best CD rates are for terms from 6 months to 10 years.
Charts for Vanguard Equity Index Funds:
Charts for Vanguard Fixed Income Funds:
Money Market Fund Pages at Vanguard:
Read the full story: With yields at record lows, Vanguard announces changes to three money market funds

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