Which Investment Platform Offers the Highest Interest Rates on Cash Deposits Currently: Vanguard, Fidelity, or Schwab?
Investors Seek Higher Yields on Idle Cash: Exploring Alternatives to Money Market Funds at Top Brokerages
In today's financial market, investors are tirelessly seeking ways to maximize their returns on idle cash. While the three leading U.S. brokerage firms—Charles Schwab, Vanguard, and Fidelity—provide money market funds, their yields can be surpassed. Here's how to boost your earnings by exploring high-yield savings accounts and CDs.
Idle Cash in Brokerage Accounts
Sometimes, you might find yourself with uninvested funds in your brokerage account, whether from the sale of stocks or ETFs or purposeful cash allocation to shield assets from market volatility. In such cases, it's essential to generate a reasonable return on this uninvested cash.
While every brokerage offers a money market fund, the yields on these options vary across firms. Currently, the largest brokerage firms—Schwab, Vanguard, and Fidelity—offer money market yields within the upper 3% to lower 4% range, with Vanguard leading at 4.20%. Fidelity trails slightly, with a current yield of 3.92% on its Government Money Market Fund (SPAXX).
Schwab, sandwiched between the two, provides most customers with 4.12% through its Prime Advantage Money Fund - Investor Shares (SWVXX). Wealthy investors with a million dollars or more in uninvested funds can secure a higher rate through Schwab's Ultra Shares (SNAXX), with a current yield of 4.27%, topping Vanguard's 4.20% offer.
Elevating Yields with High-Yield Savings Accounts and CDs
Though rates in the upper-3% and lower-4% range are reasonably competitive, you can significantly increase your earnings by moving uninvested cash to top-paying savings accounts instead. Currently, over a dozen leading high-yield savings accounts pay 4.40% or more, with some offering up to 5.00% APY.
Maintaining your cash at the same institution as your investment accounts may be convenient, but the advantage is minimal. Electronic transfers to or from a bank account, though not immediate, can usually be executed by your brokerage firm within a day. If you don't plan to reinvest the cash soon, the case for letting it earn a much higher rate in a high-yield savings account until you're ready to re-invest is even stronger.
Adopting a hybrid strategy—keeping a cushion of uninvested cash where you have your investment accounts and moving a portion of the funds into a nation-leading savings account—can help boost your earnings. Additionally, socking a portion of your savings in one of today's top-paying CDs can provide a high, guaranteed return, as rates are locked in for the full term of the certificate (ranging from 3 months to 5 years, with rates currently ranging from 4.28% to 4.65%).
Investopedia's daily rate research on hundreds of banks and credit unions reveals that you can find rates that are significantly higher than the national average (currently at around 0.41%). For example, some online high-yield savings accounts offering top rates include Evergreen Wealth, Openbank, EverBank, Bread Savings, and Rising Bank, which pay from 4.30% to 5.00% APY, depending on deposit requirements. Mainstream offerings typically cluster in the 4.30%–4.40% APY range, while select accounts push to 5.00% APY with higher deposit thresholds.
- Given the low yields of money market funds at brokerages like Charles Schwab, Vanguard, and Fidelity, a wise approach for personal-finance management is to consider investing idle cash in high-yield savings accounts or CDs, which can offer rates as high as 5.00% APY.
- In the quest for higher yields on idle cash, it's worth exploring personal-finance options like high-yield savings accounts and CDs, which can provide returns significantly higher than the 3% to 4% range offered by money market funds at top brokerages.
