Like millions of Americans I use Vanguard and Fidelity for managing most of my Mutual funds and ETFs. As a result of selling some stocks and lowering my automatic fund investments (due to a brutal stock market) I have about 20% of my portfolio in cash.
I figured that with higher interest rates I could keep some of this money in their money market accounts – VMMXX for Vanguard and SPAXX at Fidelity. But when I checked their rates recently I saw that they are less than 2% (30-day yield).
However when I checked the the yield on some high-interest savings accounts, I realize that the Vanguard and Fidelity funds were nearly one to two percent below some of the leading online savings accounts (see table below from SuperMoney)!
Clearly I need to rectify this situation and find a better place to park my cash holdings.
Go for the High Yield Savings Account Instead
I know money market accounts are primarily used to safely park money because they never “break-the-buck,” but the fact that the difference in yields between these accounts and high yield savings account (which have no expenses) are so significant means I am losing money every day by leaving money at Fidelity and Vanguard.
It would actually be much more cost effective to park my money in a higher yield savings account that have no expense or account fees.
I already opened a high yield savings account and have completed the transaction to move the funds out of my money market account prior to writing this article.
It only took a couple of days since I have to go through my Wells Fargo checking account which links to both accounts. But opening a new high yield account (see this list for a few good options) doesn’t take long and within a few days you can actually start making, rather than losing, money on the most liquid of your cash savings.