Right now, I’ve got most of my 6-month emergency fund spread across T-bills, CDs, and bonds, just to learn more about each. But now I’m thinking of moving everything into SGOV instead. It seems to have a better yield than anything else, and with no state taxes, it feels like the best option for safe investments. Am I missing something?
Check out VUSXX. It’s free from state and local taxes and is 100% treasury, so it’s as safe as it gets.
VUSXX is solid too. Honestly, both SGOV and VUSXX are great options for emergency funds. You really can’t go wrong with either one.
SPAXX is another option, especially if you’re with Fidelity. You can set it as your core position and won’t need to manage it manually.
Edit: Not fully state tax-exempt though. About 41% is government bonds.
Sadly, Fidelity doesn’t let you buy VUSXX.
Take a look at FDLXX on Fidelity. You can’t set it as a core position, but it’s another option.
SPAXX isn’t as tax-exempt as the others, which is a big downside.
Good point, I’ll add that to my notes. Thanks!
Emergency funds shouldn’t be thought of as investments. SGOV’s yield will go down as higher-yield bills mature and get replaced by lower-yield ones. I wouldn’t stress too much over it. Just put your money there for now and move it later if necessary.
I used to bounce between HYSAs and T-bills, but it became too much work for a small difference. Now I just park my emergency fund in a solid savings account and forget about it. It’s way less stressful.
Same here. I switched to a Treasury-only money market fund and haven’t looked back. The tax savings on state and local levels make a big difference, and I don’t have to deal with rolling over Treasurys. Just make sure to avoid funds with a large percentage of Repurchase Agreements (Repos), as those aren’t tax-exempt.
Not much else is out there.
drawdown is basically zero.
Look into BOXX. It’s safe and appreciates at nearly the risk-free rate. Hold it for a year, and you only owe long-term capital gains.
BOXX is a bit risky to suggest to newcomers. It’s a unique ETF and the first of its kind, so we don’t know how it’ll hold up long term. Plus, the IRS might step in and change the rules since it’s dodging taxes in a way they didn’t intend. The current fee waiver runs out in 2025.
If someone’s just asking about safe bond funds for their savings, maybe don’t throw them into the deep end with BOXX.
Fair enough, it is a newer approach. But being able to defer taxes to long-term capital gains is a nice feature. If you’re frequently moving in and out of emergency funds, you won’t have to worry about wash sales like you would with something like SGOV.
It’s not for everyone, but it’s been working for me.
Only 60% of BOXX’s gains are taxed at the long-term capital gains rate, and you still have to pay state tax. With SGOV, you avoid state taxes altogether. BOXX can also lose value if rates drop low enough, which won’t happen with SGOV.
Can you explain that a bit more or send me a source? I want to learn more about my options for safer investments.
https://www.youtube.com/watch?v=A6Xts-oRNFc
This video explains it well. There’s some concern that the IRS might change the rules in the next year or two, making BOXX less attractive.
Also, check this out:
https://www.reddit.com/r/investing/comments/1eremcy/comment/lhykhe6/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button
There’s also the fee waiver issue. It ends in 2026 if I remember correctly.
Full transparency: I’ve got a five-figure sum in BOXX.
With BOXX, you don’t pay any taxes unless you take money out, unlike SGOV.
When you do withdraw from BOXX, it counts as capital gains, so if you have any capital losses, you can use those to offset your taxes.
Interesting, I’ll dig into this some more. Thanks for the info!