My wife and I have accounts at Fidelity and Charles Schwab. Fidelity has a money market sweep...Earning about 1.3% (7 day average)...Not bad, not good. OK for the industry...Middle of the pack. I go to Charles Schwab and they are pushing their bank. My money is swept into a bank account...Earning maybe .015%!! With Fidelity I can wait, look for my opportunity to reinvest and earn a fair amount while the money is on the sidelines. With Schwab, I have to reinvest as quickly as possible since my money is earning diddly squat!! Make a move or lose interest income. I own stock in Schwab and enjoy their return. Also with rates going up (Feds) they will be making a lot more money with their money on the sidelines. Back in the 90's you could keep your money in a money market account and earn 4-6% waiting for a good investment to come along. Now with Schwab, you have to invest quickly or push it into a CD to gain something decant. Anyways, just thought would could get a thread going about sweep money and how your broker handles it...And do you think it's fair?? Cabin
Buy and hold...Covered call trader here. Can we talk about money market/bank sweeps of our funds??
- Thread starter Cabin111
- Start date
Just saying Schwab is working (hard) to make a ton of money that is being put on the sideline. What use to go straight into a money market fund goes into a bank. People who are not on top of this issue (widows ers, estates, trust) may not be aware of what is happening. A manager of an account may think they are doing the right thing by keeping money on the sidelines while they wait to distribute an estate or trust. But when in fact they are unaware that they are doing harm to the account by not looking at the total return on an investment. That's all I'm saying.
I will throw out a couple of other things on this topic. I have ML Edge and have been able to purchase TMCXX which has 100,000 minimum initial buy(also requires a call to a trader, no online trading). A recent yield has been over 2%, I also have an ameritrade account and recently found NPLXX which has 10,000 for retirement account. It showed about 1.3% yield and was available online. I have not sold either yet so no round trip experience yet. I will also let you know this additional piece of info. At both ML Edge and TDA, neither recognize my money market account as tradeable cash balance. Its shows as cash but is not reflected in trading balance cash. I have not tried to buy anything since I found these MM options for my current extra cash. There was a recent article on seekingalpha and in the comments someone mentioned for Schwab they use SWVXX. No experience with it, just an FYI.
One thing...If you don't like what you have (and move), you get dinged with the exit fees. They are getting higher and higher. Something to consider as I ponder what to do. I just watch my bank money closely as Schwab...Make sure my wife and my account's (Roth IRAs) don't sit long periods of time with a ton of money in them...