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Making your money work for you and not against you is one of the most crucial lessons investors learn early on. The trick, though, is to decide the best way to invest while not losing your funding.


If you currently use a savings account or other high-risk account to store your finding before investing, you should consider a vanguard prime money market fund. This article will explain the Vanguard Prime Money Market Fund, how to invest, what you risk, what you gain and how to use it properly.


By the end of the article, you will have all of the information you need to make a wise choice and invest smartly, making your money work for you, which after all, is the primary goal for every dollar we invest.

What Is A Vanguard Prime Money Market Fund?

A Vanguard Prime Money Market Fund is a low-risk investment that should be used as a short-term plan. The idea is to offer investors a low risk, low reward fund to keep their investment money secure.


With low to zero annual fees, the Vanguard Market Funds are easily obtained, hard to lose and are kept at a single dollar share price. The return is based on the investment interest rates.


These accounts are considered to be the most conservative of all investment accounts, and you can enroll, obtain and maintain an account with a low start-up fee, small investment amount and a secure method of interest yielding portfolios.


For example, let’s assume Margaret doesn’t quite yet know how she wants to invest her money, but she knows she wants to invest at least $3,000. Instead of paying daily or weekly fees, trading to buy stocks and bonds on her own or even risking everything in one shot, she can purchase a Vanguard Prime Money Market Fund.


Her $3,000 is highly secure, will earn her a bit of interest-bearing returns and has virtually zero risks of being lost. While Margaret decides exactly how and when she wants to invest her finds, her portfolio is earning her money.

How To Open An Account

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If you are interested in opening a Vanguard Market Fund account, you will need to have the type of account, and all pertinent information at the ready. There are several types of Vanguard accounts, but the two main Market Fund accounts are Prime and Federal.


The Federal accounts only invest in U.S. Government securities. Prime accounts invest in U.S. Government securities, CDs, and repurchase agreements. Prime accounts generally have a higher annual return (about 4.99 percent) than a Federal account.


Once you have decided you just need to fill out an online application, state how you will fund the account and meet the minimum requirements.


One of those requirements is to open the account with a minimum of $3,000. Any additional investments can be as low as $1.


You also have to maintain a minimum balance of $10,000 to avoid the $20 annual fee. However, you can also have the fee waived if you opt for the Vanguard E-Delivery service, where you get all of your account information, updates and alerts sent electronically instead of using hard paper copies and the mailing services.


If all minimums are met and agreed upon, the form only takes about 10 minutes to fill out, once the account is funded, you are set up, and your money is starting to work for you, instead of against you.


How To Use The Account

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In general practice, Vanguard Prime Money Market Funds are a short-term savings investment. There is a slightly higher risk of losing money than a traditional bank savings account. However, the risk/reward allows your money to stay virtually risk-free while maintaining a higher interest return.


Once the account is open, you will receive your statement alerting you to how the money is invested. For the short version, you will maintain your account balance until maturity, which is usually about 49 days. Lifetime maturity is usually 89 days.


These short-term investments allow the money market funds to maintain current income and liquidating to a constant and stable share price of $1.


As the account matures, you can use the funds to purchase CDs, (certificates of Deposit), EFT’s, Stocks, Bonds and other securities. How you decide to invest then will be up to you or your broker. However, in the meantime, the money will enjoy a safe place to grow and have an annual percentage yield of almost 5 percent, which is generally higher than most savings accounts.

When To Invest

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Investing is always a risk, and there isn’t a schedule that they market will follow. As such, there isn’t a good or bad time to buy, unless something is currently affecting the market. Your broker will have a better idea of what is around the corner and will offer advice on how and when to invest your funds.


If you are doing it by yourself, the security of the Vanguard Prime Money Market Fund will give you the peace of mind to take your time and invest wisely.


You can also use the market fund as a short-term savings solution. If you have a large event, like a wedding or a child going off to college, the Vanguard market funds will give you a place to allow the money you will soon spend to earn you more money while the date to pay approaches.


Other investors choose to leave the minimum in the account while they take higher risks with other funds, using the Vanguard market funds as a safety net, should their ventures not pay off.

What Are The Risks?

Anytime you put your money in the market there are risks. In general, though, risk is associated with loss of money and with the Prime accounts your only losses come in the form of taxes and fees.


You won’t pay any fees to open the account, can have the annual $20 fee waived and are only subject to state and federal taxes each year. The Market Fund is taxable income by both the state and federal governments.


Depending on your tax bracket, the amount charged will vary. However, it is rarely, if ever, more than the return.


Aside from a massive stock market crash that involves the fall of the U.S. Government and the financial institutions as we know them today, there is very little risk involved.


What Are The Costs Of Opening And Maintaining The Account

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The initial costs will be $3,020. You must open the account with $3,000 of your own money, and there is an initial $20 set up fee. However, this sets up fee is waived under most circumstances, which will be outlined as you progress through the account opening information and filling out the forms.


After the initial deposit, there are no further deposit fees. You can add to your fund with as little as $1 per transaction. You will also be charged a $20 fee every year for account maintenance.


There are two ways to avoid the annual maintenance fee. First, you can have an account balance of at least $10,000. With this balance, Vanguard will waive the annual fee.


They will also waive the fee if you opt-in to go paperless. All account summaries, information, portfolios, and updates will be sent electronically. Anything that must be signed will require a digital signature, and you will not have any mailings, deliveries or changes notified through paper-based means.


Everything will be done electronically, through email or the Vanguard website account login pages. By going paperless, the fees will be waived, which is an effort to save resources and time.


There are no other costs, fees or investments required or demanded for the account.


In Conclusion

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The Vanguard account is a secure, safe and effective short-term solution to savings accounts of storing money in a coffee can under the porch. The low risk, the low reward system is viable for those looking to make their money work for them while deciding how to invest their funds, save for future purchases, or other funding options.


After the initial investment of $3,000 and the possible $20 start-up fee, you can invest any amount over $1 at any time. Your money will be liquidated and used to maintain a share balance of $1, and earn you, on average, a near 5 percent interest rate return.


The income is taxable on both state and federal levels, and you will need to claim it properly when filing your taxes.


If you are looking for a low risk, short-term method of holding your money, a Vanguard Market account is a viable option.

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