The Vanguard Cash Reserves Federal Money Market Fund is a stable value collective investment trust that seeks to preserve a dollar per share net asset value (NAV). The fund invests solely in the Vanguard Federal Money Market Trust, a series of collective investment trusts that invest in short-term, interest-bearing obligations issued by or fully guaranteed by the U.S. government or its agencies. It offers easy access to cash at all times, as well as diversification and low volatility relative to typical money market funds. To learn more about the fund’s objective and how it has performed over time, read on.
Fund objective
The fund seeks to preserve a dollar per share NAV by investing all of its assets in the Vanguard Federal Money Market Trust, a stable value collective investment trust.
The fund’s benchmark is the U.S. dollar London Interbank Offered Rate (LIBOR). The risk of loss in a money market fund is low. The fund’s NAV should remain stable at $1 per share and the principal amount invested will be returned, although it is possible for an individual shareholder to lose money over time if investments are sold at prices less than their cost. Investment performance is an important indicator of overall performance; however, while you may experience gains or losses due to fluctuations in share price or because of sale or redemption activity on your account, you will not lose more than 100% of your original investment because the funds’ objective is full preservation of capital at all times.
Fund performance
- The fund has a 5-year annualized return of 1.25%. The fund is ranked in the top 15% of all funds in its category, which means it has performed better than 85% of its peers.
- Its 3-year annualized return is 1.31%. This indicates that over the last 3 years, this fund outperformed three-quarters of its peers and did so by at least one percentage point.
- Its 1-year annualized return is 1.39%. This means that over the past year, this fund outperformed three quarters of its peers by at least one percentage point (and did so by more than 0.5 percentage points).
Diversification and risk
Diversification is a strategy that reduces risk by investing in a variety of assets. Diversification does not assure a profit or protect against loss.
It only helps to reduce the risk of investing in any one asset. Diversification is one of the most important methods for mitigating risk, as it allows investors to make more informed decisions with their money.
The easiest way to diversify is by buying into a mutual fund. Mutual funds allow people with a variety of investment goals to invest in a single investment vehicle.
Fund details
Vanguard Cash Reserves Federal Money Market Fund is an open-end management investment company registered under the Investment Company Act of 1940. The fund’s investment objective is to provide a high level of current income exempt from federal income tax.
The fund invests at least 80% of its assets in the Vanguard Federal Money Market Trust, a stable value collective investment trust that seeks to preserve a dollar per share net asset value (NAV). The remainder may be invested in short-term debt securities (which include U.S. government obligations such as Treasury bills and agency debt) or repurchase agreements collateralized by such obligations, including U.S. government instruments; treasury inflation-protected securities; commercial paper issued by corporations with investment grade ratings; federal funds sold or purchased through prime brokers; overnight bank deposits; and shares of money market funds that invest primarily in short-term debt securities issued by non-financial institutions.
The fund’s board of trustees reviews these investments periodically for credit quality, maturity and liquidity risk exposure limits established by the Board, which are designed to ensure that no more than 25% of assets can be exposed to any one issuer or sector without management approval (not including agencies), while up to 50% may be invested in commercial paper rated A–/P–1+, Aa3/P1+ or higher.
Top 10 holdings
The fund’s top 10 holdings as of June 30, 2019 were:
Vanguard Federal Money Market Trust (VMMXX) — 26.6%
State Farm Bank (STFBX) — 15.3%
Vanguard FTSE All-World ex US Index Fund (VEU) — 6.8%
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) — 5.7%
iShares Core S&P 500 ETF (IVV) — 3.2%
iShares Currency Hedged MSCI EAFE ETF (HEWG) — 2.4%
iShares 20+ Year Treasury Bond ETF (TLT) — 2.2%
BlackRock MuniYield Quality Fund III Inc Portfolio [MUNI] 1-5 year bonds – Short Term Portfolio – C Class – B Series Trust as of July 31st 2019.
The fund invests solely in the Vanguard Federal Money Market Trust, a stable value collective investment trust that seeks to preserve a dollar per share net asset value (NAV).
The fund invests solely in the Vanguard Federal Money Market Trust, a stable value collective investment trust that seeks to preserve a dollar per share net asset value (NAV). The fund’s investments are subject to legal requirements, including those of the Investment Company Act of 1940. The fund may hold cash or cash equivalents consisting primarily of U.S. Government securities and money market instruments issued by government-sponsored enterprises for short-term liquidity needs.
The fund’s portfolio is subject to a lock-up period that prohibits the sale or transfer of fund shares for up to 90 days after they are purchased. The Vanguard Federal Money Market Trust is rated “AA-” by Standard & Poor’s and “Aa2” by Moody’s Investors Service.
The fund’s objective is to preserve principal while providing a reasonable current income. The fund invests primarily in U.S. dollar-denominated money market securities, including commercial paper and U.S. Government treasury bills and obligations of government-sponsored enterprises (GSEs). The fund may also invest in foreign currency-denominated instruments, as well as other types of debt securities, such as corporate bonds, asset-backed securities and mortgage-backed securities that meet certain requirements for quality and liquidity.
In conclusion, this is an excellent fund for investors who want to hold cash and earn interest without sacrificing returns. The Vanguard Federal Money Market Fund has a reasonable expense ratio of 0.01%, which makes it one of the cheapest options available for investors looking for a low-risk investment with above-average yields. The 1-year yield is currently at 2% while the 3-year yield stands at 1%.
