VMMXX vanguard funds

I’m 27 years old. I bought vanguard prime money market fund $3000 what does that do?

Welcome @Cel_Gig!

VMMXX is a “money market fund”. What that means is it’s essentially cash. You’re not investing it, it’s just sitting there. Without knowing more about your situation, I would venture a guess that you really want to be investing that $3,000, not letting it just sit there in cash.

Take a look at this article. There are ticker symbols for Vanguard at the bottom:

I’m in a similar boat with about $5k in VMMXX in addition to my 3-fund portfolio at Vanguard. I was auto-investing into it until recently when I looked more carefully at yield and my overall portfolio.

Should I:

  1. Sell for cash? The reason I bought into the fund was to supplement my emergency fund, which is in an Ally savings account.
  2. Exchange for an index fund? JL Colins wrote a blog post about this back in March, but I can’t tell from his language if he exchanged his shares of VMMXX for VBTLX or if he simply held VMMXX and bought an equal monetary amount of VBTLX to maintain his previous allocation. I’ve read it multiple times and still can’t tell. Here’s the blog post.
  3. Hold and hope the yield increases someday? It was 1.70% when I bought into the fund at the beginning of the year. Now it’s a meager 0.19%.

I’m leaving towards 2 but unsure of capital gains tax. I’m assuming I’d pay short-term capital gains tax because I’ve had the fund only since January 2020.

Hey @diwhitman!

What’s the goal of that $5,000? Do you plan to spend it in the next few years, or is this part of your long term investing portfolio?

No plans to spend it within the next five years. It would be in my index funds if it weren’t already in VMMXX.

Then I would definitely dump it into your index funds! No reason to leave cash sitting around unless you’re super old and that’s part of your asset allocation plan.