Comments on: Tax Exempt Money Market Funds: VMSXX

By: Liz

Liz — Thu, 26 Mar 2009 07:37:43 +0000

If I invest $5000 in a money market account, will I get paid interest every month and if so, how much? Also, is there any penalties for withdrawing the funds if I need them? What’s the current interest percentage right now?

By: Chris Pavoni

Chris Pavoni — Tue, 09 Dec 2008 20:40:44 +0000

Curious as to how safe Vanguard’s California tax-exempt money market fund will be if The state of California continues its downward budgetary spiral and is unable to meet its debt obligations. Cities in California ie. Vallejo going bankrupt and other cities following suit. We are protected until April ‘09 if this fund ‘breaks the buck”, but it is the ensuing months after that worries me.

By: Patrick

Patrick — Tue, 21 Oct 2008 19:35:41 +0000

I have heard of State Money Market funds where you don’t pay federal or state taxes. Right now they are pretty nice to have, but if the market rebounds, they are only good to own if you pay very high taxes. I wish I would have put all my money into one last year though…

By: Miss M

Miss M — Mon, 20 Oct 2008 21:16:59 +0000

I just started investing in a tax free bond fund, not quite the same thing but similar. It’s free from both federal and California state taxes. I haven’t tried it long enough to have an opinion, I’ve been meaning to add a bond fund for awhile. I wouldn’t be surprised if everyone is jumping on these right now, any investment that is in positive territory is better than the current alternatives.

By: Flexo

Flexo — Mon, 20 Oct 2008 19:09:23 +0000

I invested in VNJXX (New Jersey Tax-Exempt Money Market Fund, exempt from federal income taxes and my state income taxes) at the beginning of the month (and wrote about it, naturally). On Oct. the 7-day yield was 4.83%, now it’s 2.82%. A result of everyone jumping into tax-exempt money market funds? Or a new lack of faith in the state’s economy? I don’t know, but it turned out to be not as great a move as I thought.

By: jim

jim — Mon, 20 Oct 2008 18:15:05 +0000

Hmmm, they may be high right now because of market conditions (they are high, as to why it’s unclear) but they’re still high. I don’t really know what normal is but I do know that in the past, when I have looked at them, they were OK yields (not great, but not bad).

Yep, the best way is in taxable investment accounts.

By: Eric N.

Eric N. — Mon, 20 Oct 2008 17:56:31 +0000

Hi Jim,

I’ve been reading a lot about these tax-exempt MMFs lately, but is it true that their great yields are an abnormality because of market conditions? I’m just curious about what is considered their “normal” yields and if they do in general outpace online savings account.

Also, thanks for the last point about not investing in them in accounts like Roth IRAs. For some reason, that didn’t click in my head initially….so the best way to invest in these are through taxable investment accounts right?

Thanks for the post!