Early Retirement Extreme Forums

Hello, I have some money in the Vanguard Prime Money Market Fund VMMXX and I wanted to leave it there because I believe the market will correct in some time. My question is in regards to the safety of this fund. I thought it was just like a bank and my money was insured up to 250k while receiving 1% return, but after talking with a rep at Vanguard they explained there is some risk but it's very low. For a measly 1% return I don't want any risk! Especially since there is a .16 expense ratio and the account is not insured; so my questions are

Is there really very low risk here or if there were a big crash like in the recession could I lose money?

Would it be a better idea just to transfer the funds to an online bank which has over a 1% return with no expense ratio and FDIC insurance?

Read the prospectus again (you did read the prospectus before investing, right?). It will say somewhere.

https://www.fdic.gov/consumers/consumer ... ciorn.html =>

Money market deposit account: Insured
Money market mutual fund: Not insured(*)

(*) During the credit crisis, some money market mutual funds took significant damage, so IIRC some rules were changed. But maybe I'm wrong. If the rep, says there's low risk ... I suspect, there's no insurance. Otherwise, there'd be no risk.

I'll second rereading the prospectus/strongly advise reading the prospectus of any potential investment. The answers you seek are in there. Vanguard describes the types of risks associated with any of it's funds in the prospectus' for those funds. It describes them in plain, easy to understand language too, which is quite helpful.

The VMMXX you are correct is not insured. Depending on how much money your talking about there are several quality credit unions you can put some money in. Having said that If that fund was to go debunked I think there would be bigger worries imho.

I wouldn't worry about VMMXX not insured. Been using VMMXX to park money for many years.

More on VMMXX from Motley Fool:

https://www.fool.com/investing/2016/09/ ... -to-k.aspx

Some MM mutual funds "broke the buck" during the financial crisis due to declining investment values. Who knows what else could go wrong next time (ex. Fraud, lack of liquidity, panic, etc.). If I want to be safe, I put my money somewhere that is federally insured against everything; NCUA, FDIC. If you have more than $250k, put $248k in multiple acccoints at different institutions. I say $248k, because that way your interest earned will be insured as well. Make sure you keep monthly statements.