![]() The caveat for both Schwab and TD is that this does not happen automatically. There are even tax-exempt choices for two states with the combination of high taxes and high population, California and New York. I have used Schwab Value Advantage Money Fund Investor Shares ( MUTF: SWVXX) to good advantage: Importantly, they also offer a fine way for high-income investors to defray taxation by offering tax-exempt money funds as well. Schwab also gives you the option of "Schwab Purchased Money Funds." In the company's description of these funds, they note these funds "are designed to offer stability of capital, liquidity, and current income." They provide higher yields across the board, no transaction fee to buy or sell, no minimum holding period, and a minimum to transfer in or out of $1. No one tends to keep a static cash balance, but if you average that amount as you buy and sell during the year, the numbers are roughly the same. Keep $10,000 there between investments, at the end of the year you have $23 gross. If you keep $1000 on balance with Schwab for one year, you will receive $2.30 in interest, before federal taxes, state taxes, inflation, dealer prep and undercoating. The current annual percentage yield Schwab pays you is 0.023%. However, you pay a high price for that extra layer of protection. (Securities products and services (including unswept or intra-day cash, net credit or debit balances, and money market funds) offered by Charles Schwab & Co.) ![]() These funds are held at one or more FDIC-insured banks that are "Affiliated Banks" - affiliated with Charles Schwab & Co., Inc. This is where Schwab pays you interest on the cash you keep in your account between investments. The Schwab default if you don't select something else seems to be the "Bank Sweep." The same applies if your account has been open for some time. When you open your account, you may not even bother reviewing these other options. If you stop thinking of it as money just sitting there, as merely cash available for a new opportunity, and think of it instead as "cash available for a new opportunity that pays me while waiting," you may well find the money multiplies just as it does when you receive dividends or other types of interest. Schwab's Special Money Market FundsĪt Charles Schwab & Co., there are many options for how you invest your cash. The difference between those and the ones below is in the nature of buying, selling, the holding period, and possible fees at most MMFs. You can buy any of scores of MMFs any time you like. These are money market funds (MMFs) which have a special relationship with Schwab and TD. In the spirit of communal learning here at SA, you are welcome to report your findings in the comments section! It will also provide information for those who invest at other firms to query their firms. I have not researched Fidelity, E-Trade or any others, but I think the study of how these two Big Dogs provide better cash management possibilities than their normal "sweep" options will be of much benefit to the greatest number of SA readers. ( SCHW) and TD Ameritrade ( AMTD) are the two biggest online firms with the most brokerage clients. ![]() Well, at least right under their noses when they are looking at their account statements.Ĭharles Schwab & Co. ![]() Too many investors listen to the siren call of high yield when there is a way to increase their income right under their noses. ![]()
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