Update on RYPQX
July 17th, 2007 by Grant in: Investing, Stock ThoughtsA little over a week ago, I wrote that the RYPQX fund would be a good place to stash cash that is currently sitting on the sidelines.
You’ll remember that the Reserve Yield Plus Fund (RYPQX: Yahoo, web, prospectus, fact sheet) maintains a $1.00 share price and currently pays about a 5.25% return on your money.
So where’s the catch? Currently, I can’t find one.
I have queried Ameritrade about whether there is a minimum investment or holding period, and they have indicated that there is neither. There are also no commissions to get in or out…
The only drawback that I can see is that it does trade like a mutual fund. In essence, you put in a trade order by a certain time, and they buy or sell your shares at the end of the day.
So it’s not as liquid as a stock, but it’s more liquid than my Emigrant Direct account, and certainly more liquid than a CD.
I think I’ll buy a few shares of RYPQX just to see how the transaction works, but in the mean time, if anyone has any experience with the fund, please let me know!
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July 18th, 2007 at 12:33 am
Thanks for the update.
I think one catch is that the 5.25% is due to the waiver of expenses of ~100 bps. Not sure how long the waiver will last; when its gone, the yield would drop to just 4.25%.
July 18th, 2007 at 8:21 pm
[…] « Update on RYPQX […]
August 3rd, 2007 at 2:47 pm
I’ve been holding some RYPQX in my Roth IRA since February. I think that the “catch” is that it is not a sweep option. Because of that, TD Ameritrade doesn’t consider the cash funds to be part of your “available cash” for the purpose of trading. I have come to the situation where I wanted to place a limit order on some stock, but TD Ameritrade won’t even let me enter the order because my funds are tied up in RYPQX. I need to liquidate enough RYPQX before the system will let me put in my buy order.
Quoting from my own blog: I think that TD Ameritrade made this process unnecessarily cumbersome. Because RYPQX trades like a mutual fund, there is a 1 day settlement period on funds. For stocks, the settlement date is 3 days later. So in theory, one should be able to execute a stock trade and then later liquidate enough fund holdings to cover the trade in time for settlement. However, the new TD Ameritrade website will not allow you to even enter an order if it thinks you don’t have enough in your cash sweep. By my memory, the former Waterhouse website did not have this particular restriction on placing stock trades.
September 18th, 2007 at 3:52 pm
All premium money market funds (non-sweep) are mutual funds. They need the right to withhold funds in the event of a panic. If you want assured immediate access to your funds, a non-savings bank account is required.
Where did the idea that management fees would lower the yield to 4.25%? They’d be out of business overnight!
And why is this better access than an Emigrant Direct account?
As for traditional savings accounts, note that GMAC bank rates are close to 5.3% and FDIC insured, as is a Countrywide CD, currently 5.65% for 12 months. Of course, at a savings bank, the institution also has the right to n withold your funds for a period of time.
In the event of a real financial upheaval, I would image every sector would be affected and the only sure preventive is to sew some diamonds in your undies!
September 18th, 2007 at 7:45 pm
Howard, indexfundfan is referring to the expenses that the fund waives. If they charged out those expenses, the net effect would be a 4.25% return, or there abouts…
Also, my RYPQX idea is for my Roth IRA account held in Ameritrade. I contribute $4,000 per year to the Roth (the maximum) but I don’t necessarily buy stocks right away. However, since Ameritrade doesn’t pay squat to hold cash, RYPQX is a good place to stash the funds so they at least earn some interest while they’re not held in stocks.
February 13th, 2008 at 2:36 pm
“Ameritrade gathered $185 million in revenues by paying clients so little on their idle cash and then “sweeping” it into an account run by a banking partner, where the money earned Ameritrade a much higher rate.”
http://articles.moneycentral.msn.com/Investing/CompanyFocus/DontGiveYourBrokerAFreeLoan.aspx
March 9th, 2008 at 10:48 am
It has an expense ratio of 1.07%
March 9th, 2008 at 11:10 am
True Mike, however any fees associated with the expenses are waived by the fund.
March 14th, 2008 at 10:14 pm
What are the risks???…Seems to good to be true.
March 15th, 2008 at 9:11 am
The risk is that the value of the investments that they’ve got your money in go down. However, the funds and bonds they invest in are fairly sleepy, and while the overall value of that investment basket might go down a little bit, it won’t reflect the volatility in the overall market.
That said, even if the investment portfolio goes down, the NAV will stay the same (as that’s the goal of the “reserve” group of funds: maintain a NAV of $1.00).
It may seem too good to be true on the surface if you compare the ticker to a stock. If you compare the ticker to a mutual fund (which is how it trades) it becomes more reasonable.
-Grant
March 15th, 2008 at 8:49 pm
Thanks!
April 28th, 2008 at 12:15 pm
Grant, are you still holding RYPQX? It seems like the waiver of expense is reduced from 100bps to ~55bps.
April 28th, 2008 at 5:44 pm
From the most recent overview:
Due to a voluntary waiver of expenses, the annual operating expenses for Class Treasurer’s Trust were 45 basis points (bps) from March 1 through March 3 and 47 bps from March 4 through March 31. Likewise, the annual operating expenses for Class R were 50 bps from March 1 through March 3 and 52 bps from March 4 through March 301.
June 10th, 2008 at 8:55 am
[…] week I started increasing my position in the Reserve Yield Plus Fund (RYPQX: web, prospectus, fact sheet, Y!). Two weeks ago I finally started buying in to the fund, […]