So I have some bond holdings in my Vanguard Roth IRA which is some of the bond % I hold in my total portfolio to aim for a 90%/10% equities/bond ratio. The Vanguard Roth IRA bonds I hold are in VBTLX (total bond market index) currently, which shows a "30-day SEC yield as of 07/06/2023" of 4.41% and "fund average annual returns" of 1.48% (last 10 years). Not entirely sure if the yield (which is dividends it pays I believe) are in addition to the annual returns (share price increase).
I just noticed that any funds put into my Roth IRA go into the "settlement fund" which appears to be held in VMFXX (Vanguard federal money market fund). That fund shows a "30-day SEC yield as of 07/06/2023" of 5.04% and "fund average annual returns" of 0.94% (last 10 years). This appears to be much closer to the federal funds rate (even higher than my HYSA with Capital One which is at 4.15% APY).
So my questions are...
I just noticed that any funds put into my Roth IRA go into the "settlement fund" which appears to be held in VMFXX (Vanguard federal money market fund). That fund shows a "30-day SEC yield as of 07/06/2023" of 5.04% and "fund average annual returns" of 0.94% (last 10 years). This appears to be much closer to the federal funds rate (even higher than my HYSA with Capital One which is at 4.15% APY).
So my questions are...
- How much does VBTLX return on average per year? Is the math 4.41% (dividends) + 1.48% (share price increase average over last 10 years) = 5.89%/year? Or is the 1.48%/year average including the current 4.41% yield? Similarly for the VMFXX "settlement fund"... does it return 5.04% + 0.94% = 5.98%/year on average for the past 10 years? Or is the 0.94%/year (over last 10 years average) factoring in the current 5.04% rate?
- It appears the settlement fund relies on "cash & US government securities" instead of VBTLX for example which relies on "U.S. Treasuries and mortgage-backed securities of all maturities". Vanguard describes the VMFXX fund as "one of the most conservative investment options offered by Vanguard" and it also yields more (5.04% I believe) than the bond fund currently (4.41% I believe ?). Why wouldn't one just sell any bond allocation and hold in the "settlement fund" instead of actual bonds as it returns higher than the bond fund?