Lower Expense Ratios (Still) Predict Higher Performance

Posted on August 17, 2025 // 3 Comments

The reason that low-cost index funds continue to grow in popularity each year is simple – they make you more money! If Wall Street could figure out how to make you more money reliably with their sheer skill and then charge you for a little sliver of that skill, then of course they’d prefer to do that. Passive funds took their market share as a result of merit, not marketing. Chart above via Yahoo Finance.

Jeffrey Ptak of Morningstar continues to share the most recent evidence that costs matter. In this Morningstar article, he shares a chart (see above) of “Average Forward Net Excess Return” sorted by fee grouping over 5-year rolling periods.

What I found buttresses Russ’ original findings and subsequent research he’s done on the topic: Expenses excelled at predicting funds’ performance. To illustrate, here are funds’ forward average excess net returns (versus their average peer) over all rolling five-year periods between Jan. 1, 2005, and Dec. 31, 2024, sorted by fee grouping.

In his personal Substack, Ptak shares a similar chart over different time periods of 1-year to 15-years.

The relationship is very clear. Sure, there are a few outliers (although hardly any consistent outliers over time), but as a whole, you absolutely do not “get what you pay for” with fund and ETF expense ratios. On the whole, the more you pay in expenses, the worse the performance you get in return.

Filed Under: Investing //

Vanguard Letter: Choose an Automated Cost Basis Method (MinTax Warning)

Posted on August 12, 2025 // 2 Comments

Vanguard has been sending out letters to clients with SpecID as their default cost basis tracking method. This letter has caused a lot of confusion. My understanding is that they will no longer let you use SpecID for automated sell transactions, and so you will need to pick a different default cost basis method. Here are possible examples of automated sell transactions:

  • Automatic Withdrawal Plan (AWP), automatically redeems shares from your Vanguard fund account and transfers the funds to your bank account on a regular, recurring basis. Per Vanguard, this service is “ideal for IRA shareholders who are age 59½ or older and want to draw income from their IRAs”. But I’m assuming this works on taxable accounts as well.
  • Vanguard’s free automatic RMD service, which takes out exactly the amount of required minimum distribution each year.
  • Vanguard Digital Advisor and Personal Advisor, which manages and may sell shares to rebalance your portfolio for you.

This change makes intuitive sense as how would Vanguard know which tax lots you want to specify if it’s an automated sale? How did they even do it in the past? I am guessing you have to tell them within a certain window of time.

However, for manual sell transactions, you can still use SpecID and specify exactly which tax lot you want to sell. I don’t have any automated systems set up, so I am not concerned about this change. I will note that Vanguard now only allows SpecID on market orders, and not limit orders. I don’t really understand why this is the case (as long as you don’t have multiple limit orders outstanding), but it is what it is.

Here is the full text of the letter:

Action needed: Choose an automated cost basis method

Dear Vanguard Investor:

We noticed you’ve selected specific identification (SpecID) as your preferred cost basis method for certain holdings in your account. While you’ll still be able to use SpecID for individual transactions, we’re updating our preferred cost basis settings to include these automated methods only:

• FIFO (first in, first out)
• MinTax (minimum tax)
• HIFO (highest in, first out)

This change will take effect in August 2025. If you don’t select one of the automated methods as your preferred cost basis method by then, we’ll automatically set your default to FIFO. You can update your preferred method anytime by logging in to your account at vanguard.com or by contacting Vanguard. This update won’t affect any pending transactions.

Why are we making this change?
SpecID requires you to manually identify specific lots for each sale or transfer, which makes it incompatible with automation. In some cases, such as automatic distributions, IRS rules may default your trade to FIFO if SpecID instructions aren’t provided by the settlement date, which could potentially result in unfavorable tax consequences.

By switching to an automated method, you’ll still have the flexibility to use SpecID at the time of a transaction, while also benefiting from having additional automated options beyond FIFO.

To leam more about cost basis methods and your available options, please visit vanguard.com.

What’s changing on the website?
Your online experience will remain the same. You’ll continue to select your preferred cost basis method on vanguard.com. You can still choose SpeciD when placing a trade or requesting a transfer by updating the cost basis instructions at the time of the transaction using our website or app.

If you don’t update your default from SpeciD to an automated method, we’ll set it to FIFO per IRS rules. Open orders won’t be affected.

If you do have automated sales, which option should you choose? As Vanguard states, each method has its own sets of pro and cons. First, I think it is very important to understand that the “MinTax” algorithm does not guarantee that you end up with the minimum tax owed! It’s a very crude algorithm with the following priorities:

Our system prioritizes your tax savings by selecting to sell securities in the order listed below:

Short-term capital loss from largest to smallest.
Long-term capital loss from largest to smallest.
Short-term zero gain or loss.
Long-term zero gain or loss.
Long-term capital gain from smallest to largest.
Short-term capital gain from the smallest to largest.

This means that MinTax will choose to trigger a $1,000,000 long-term capital gain before a $1 short-term capital gain, simply because the tax *rate* (percentage) is the same or lower on the long-term capital gain. Meanwhile, the absolute tax incurred may be very different – see this real-life example that created a large unwanted tax bill. Mentally, I think of the name as “MinTaxRATE” and not “MinTax”.

Some folks may want to consider the HIFO (Highest In, First Out) method as it minimizes the total capital gains amount, but doesn’t take into account short or long-term holding periods. But again, every situation is different. If you don’t tell Vanguard anything, then FIFO (First in, First Out) is the default, which may create some large capital gains since they will be selling your oldest tax lots. I’d pick MinTax over FIFO.

I will probably choose HIFO, just as the backup setting with no plans to actually use it. I personally don’t like automated selling systems and prefer SpecID as I have complete control as to how many gains I want. For example, sometimes you have some tax brackets to fill, and you may actually want more capital gains in a certain year. Perhaps you have a lot of carryover losses and want to offset them.

Filed Under: Investing, Retirement //

Best Interest Rates Survey: Bank Accounts, Treasury Bills, Money Markets, ETFs – August 2025

Posted on August 10, 2025 // 3 Comments

Here’s my monthly survey of the best interest rates on cash as of August 2025, roughly sorted from shortest to longest maturities. Banks and brokerages love taking advantage of our idle cash, and you can often earning more money while keeping the same level of safety by moving to another FDIC-insured bank or NCUA-insured credit union. Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you could earn from switching. Rates listed are available to everyone nationwide. Rates checked as of 8/10/2025.

TL;DR: Savings account interest rates are mostly stable (maybe a tiny bit lower on average) with one at 5% APY but most struggling to stay above 4.00% APY. Short-term T-Bill rates at around 4.3%. Top 5-year CD rates are ~4.25% APY, while 5-year Treasury rate is ~3.8%.

High-yield savings accounts*
Since the huge megabanks still pay essentially no interest, everyone should at least have a separate, no-fee online savings account to piggy-back onto your existing checking account. The interest rates on savings accounts can drop at any time, so I list the top rates as well as competitive rates from banks with a history of competitive rates and solid user experience. Some banks will bait you with a temporary top rate and then lower the rates in the hopes that you are too lazy to leave.

  • The top saving rate at the moment: HUSTL Financial at 5.00% APY (no min), a division of Vantage West Credit Union, member NCUA (and thus not a fintech). No direct experience with this one; wonder how long it will last? The “good/excellent” savings rate zone appears to be roughly 4% and above. CIT Platinum Savings is now at 4.00% APY with $5,000+ balance. There are many banks in between.
  • SoFi Bank is at 3.80% APY + up to $325 new account bonus with direct deposit. You must maintain a direct deposit of any amount (even $1) each month for the higher APY. SoFi has historically competitive rates and full banking features. See details at $25 + $300 SoFi Money new account and deposit bonus.
  • Here is a limited survey of high-yield savings accounts. They aren’t the top rates, but a group that have historically kept it relatively competitive such that I like to track their history. I’d call this the “okay/good” zone of 3.50%+.

Short-term guaranteed rates (1 year and under)
A common question is what to do with a big pile of cash that you’re waiting to deploy shortly (plan to buy a house soon, just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.

  • No Penalty CDs offer a fixed interest rate that can never go down, but you can still take out your money (once) without any fees if you want to use it elsewhere. Marcus has a 13-month No Penalty CD at 4.15% APY ($500 minimum deposit). Farmer’s Insurance FCU has a 9-month No Penalty CD at 4.25% APY ($1,000 minimum deposit). USA USALLIANCE Financial CU has a 11-month No Penalty CD at 4.20% APY ($500 minimum deposit).
  • Eagle Bank has a 12-month certificate at 4.40% APY ($1,000 min). Early withdrawal penalty is 90 days of interest.

Money market mutual funds
Many brokerage firms that pay out very little interest on their default cash sweep funds (and keep the difference for themselves). Note: Money market mutual funds are highly-regulated, but ultimately not FDIC-insured, so I would still stick with highly reputable firms.

  • Vanguard Federal Money Market Fund (VMFXX) is the default sweep option for Vanguard brokerage accounts, which has an SEC yield of 4.22% (changes daily, but also works out to a compound yield of 4.30%, which is better for comparing against APY). Odds are this is much higher than your own broker’s default cash sweep interest rate.
  • Vanguard Treasury Money Market Fund (VUSXX) is an alternative money market fund which you must manually purchase, but the interest will be mostly (100% for 2024 tax year) exempt from state and local income taxes because it comes from qualifying US government obligations. Current SEC yield of 4.24% (compound yield of 4.32%).

Treasury Bills and Ultra-short Treasury ETFs
Another option is to buy individual Treasury bills which come in a variety of maturities from 4-weeks to 52-weeks and are fully backed by the US government. You can also invest in ETFs that hold a rotating basket of short-term Treasury Bills for you, while charging a small management fee for doing so. T-bill interest is exempt from state and local income taxes, which can make a significant difference in your effective yield.

  • You can build your own T-Bill ladder at TreasuryDirect.gov or via a brokerage account with a bond desk like Vanguard and Fidelity. Here are the current Treasury Bill rates. As of 8/8/25, a new 4-week T-Bill had the equivalent of 4.36% annualized interest and a 52-week T-Bill had the equivalent of 3.92% annualized interest.
  • The iShares 0-3 Month Treasury Bond ETF (SGOV) has a 4.24% SEC yield (0.09% expense ratio) and effective duration of 0.10 years. SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a 4.16% SEC yield (0.136% expense ratio) and effective duration of 0.15 years. The new Vanguard 0-3 Month Treasury Bill ETF (VBIL) has a 4.21% SEC yield (0.07% expense ratio) and effective duration of 0.10 years.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. If you redeem them within 5 years there is a penalty of the last 3 months of interest. The annual purchase limit for electronic I bonds is $10,000 per Social Security Number, available online at TreasuryDirect.gov.

  • “I Bonds” bought between May 2025 and October 2025 will earn a 3.98% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More on Savings Bonds here.
  • In mid-October 2025, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will post another update at that time.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops which usually involve 10+ debit card purchases each cycle, a certain number of ACH/direct deposits, and/or a certain number of logins per month. If you make a mistake (or they judge that you did) you risk earning zero interest for that month. Some folks don’t mind the extra work and attention required, while others would rather not bother. Rates can also drop suddenly, leaving a “bait-and-switch” feeling.

  • OnPath Federal Credit Union (my review) pays 7.00% APY on up to $10,000 if you make 15 debit card purchases, opt into online statements, and login to online or mobile banking once per statement cycle. Anyone can join this credit union via $5 membership fee to join partner organization. You can also get a $100 Visa Reward card when you open a new account and make qualifying transactions.
  • Genisys Credit Union pays 6.75% APY on up to $7,500 if you make 10 debit card purchases of $5+ each per statement cycle, and opt into online statements. Anyone can join this credit union via $5 membership fee to join partner organization.
  • La Capitol Federal Credit Union pays 5.75% APY on up to $10,000 if you make 15 debit card purchases of at least $5 each per statement cycle. Anyone can join this credit union via partner organization, Louisiana Association for Personal Financial Achievement ($20).
  • First Southern Bank pays 5.50% APY on up to $25,000 if you make at least 15 debit card purchases, 1 ACH credit or payment transaction, and enroll in online statements.
  • Credit Union of New Jersey pays 6.00% APY on up to $25,000 if you make 12 debit card purchases, opt into online statements, and make at least 1 direct deposit, online bill payment, or automatic payment (ACH) per statement cycle. Anyone can join this credit union via $5 membership fee to join partner organization.
  • Andrews Federal Credit Union pays 5.50% APY (down from 6%) on up to $25,000 if you make 15 debit card purchases, opt into online statements, and make at least 1 direct deposit or ACH transaction per statement cycle. Anyone can join this credit union via partner organization.
  • Find a locally-restricted rewards checking account at DepositAccounts.

Certificates of deposit (greater than 1 year)
CDs offer higher rates, but come with an early withdrawal penalty. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider building a CD ladder of different maturity lengths (ex. 1/2/3/4/5-years) such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account. When one CD matures, use that money to buy another 5-year CD to keep the ladder going. Some CDs also offer “add-ons” where you can deposit more funds if rates drop.

  • Mountain America Credit Union (MACU) has a 5-year certificate at 4.25% APY ($500 minimum), 4-year at 4.20% APY, 3-year at 4.15% APY, 2-year at 4.00% APY, and 1-year at 4.15% APY. Early withdrawal penalty for the 4-year and 5-year is 365 days of interest. Anyone can join this credit union via partner organization American Consumer Council for a one-time $5 fee (or try promo code “consumer”).
  • Lafayette Federal Credit Union (LFCU) has a 5/4/3/2/1-year certificates at 4.28% APY ($500 min). Slightly higher rates with jumbo $100,000+ balances. Note that the early withdrawal penalty for the 5-year is a relatively large 600 days of interest. Anyone nationwide can join LFCU by joining the Home Ownership Financial Literacy Council (HOFLC) for a one-time $10 fee.
  • You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. You may need an account to see the rates. These “brokered CDs” offer FDIC insurance and easy laddering, but they don’t come with predictable early withdrawal penalties. Right now, I see a 5-year non-callable brokered CD at 3.95% APY (callable: no, call protection: yes). Be warned that both Vanguard and Fidelity will list higher rates from callable CDs, which importantly means they can (and will!) call back your CD if rates drop significantly later.

Longer-term Instruments
I’d use these with caution due to increased interest rate risk (tbh, I don’t use them at all), but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10 years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable early withdrawal penalties. You might find something that pays more than your other brokerage cash and Treasury options. Right now, I see a 10-year CDs at 3.85% (non-callable) vs. 4.27% for a 10-year Treasury. Watch out for higher rates from callable CDs where they can call your CD back if interest rates drop.

All rates were checked as of 8/10/25.

* I no longer recommend fintech companies due to the possibility of loss due to poor recordkeeping and lack of government regulation. (Ex. Evergreen Wealth at 5% APY is a fintech.)

Photo by insung yoon on Unsplash

Filed Under: Banking, Deals & Offers, Investing // Tagged:

The Only AI Megatrend That Matters: Own the Businesses

Posted on August 4, 2025 // 2 Comments

We are surrounded by predictions about the imminent effect of AI. The CEO of Anthropic says that AI could wipe out half of all entry-level white-collar jobs, a “white collar bloodbath“. Vanguard (which has really started to like throwing predictions around 🔮), says the AI megatrend is “likely to augment most jobs, not replace them” with this fancy graphic on their estimates for time savings due to AI for over 800 occupations:

In the end, I only see one real “megatrend”. Ask yourself, will this make the lives of workers better, or business owners? Will the time saved by AI augmentation or automation really makes your life as an employee better? Will we all get 4-day workweeks? Or will your time just be filled by higher expectations of productivity? I’m sorry but I can’t see workers winning. I’ve always been a bit negative in this viewpoint, but that’s also why I worked so hard to try to achieve financial independence by owning businesses instead of relying on working 40 years x 40 hours a week as an employee.

What would Bogle say? Here’s part of the transcript from an interview with Joe Davis, Vanguard Global Chief Economist:

Rebecca: Principle, Investment Strategy Group
In light of all of this, how should investors be thinking about positioning their equity portfolios?

Joe: Global Chief Economist
I think it’s really important to break it down into two phases, because this could be a decade in the making.

One is, if Jack Bogle were here, I know what he would say.

He’d be like, “Joe, own the haystack,” which is all the equity market because you have technology exposure.

Then secondly, if you’re going to concentrate in areas of the market themselves and not simply own the entire equity market, history shows two things very clearly.

One is technology stocks, whatever that technology is, really outperform fora solid period but also get somewhat overvalued.

And then if you focus there, the timing stuff to get and then you can miss opportunities if the technology broadens the other parts of the economy, because if it hasn’t done that, then the technology’s overrated and technology stocks will really underperform.

So I think it’s important just eyes wide open in terms of how you think about that transition — you’re exposed to technology companies already, and if you’re going to overweight it, you may eventually miss opportunities of less valued companies that start to harness the very technology itself.

As the kids say, VTI and chill. Owning the haystack is owning businesses. If anything, the “optimal equity portfolio position” is to make sure you own as many chunks of businesses as you can.

Filed Under: Investing //

New Vanguard Bond ETFs: Total TIPS ETF (VTP) & Total Treasury ETF (VTG)

Posted on July 17, 2025 // 3 Comments

Following Vanguard’s stated plans to expand into fixed income, Vanguard recently announced the following new bond ETFs (press release):

  • Vanguard Total Inflation-Protected Securities ETF (VTP). Seeks to track the performance of an index of the full market of inflation-protected public obligations of the U.S. Treasury including short-, intermediate-, and long-term maturities. Expense ratio of 0.05%.
  • Vanguard Total Treasury ETF (VTG). Seeks to track the total U.S. Treasury bond market including short-, intermediate-, and long-term maturities. Expense ratio of 0.03%.
  • Vanguard Government Securities Active ETF (VGVT). Actively-managed bond ETF that seeks to outperform the benchmark (Bloomberg Government Total Return Index) with an expense ratio of 0.10%.

In my opinion, the most notable addition here is the Vanguard Total Inflation-Protected Securities ETF (VTP) because the only previous TIPS ETF available was Vanguard Short-Term Inflation Protected ETF (VTIP). Finally, we have an ETF option for those that want a longer-duration TIPS ETF with usually a higher real yield and thus higher expected long-term return for long-term holders. Of course, this also comes with higher real interest rate risk, meaning higher volatility and price fluctuations with changes in the real yield.

In contrast, there are already multiple Treasury ETFs from Vanguard with your choice of short-term (VGSH), intermediate-term (VGIT), or long-term (VGLT) flavors.

My current pick in this category, the Schwab U.S. TIPS ETF (SCHP) currently has a lower expense ratio at 0.03%. I hope that VTP will also become cheaper as the assets grow.

I personally only use TIPS ETFs in taxable brokerage accounts because they simplify the “phantom tax” situation with individual TIPS in those accounts. Otherwise, in my tax-sheltered accounts, I try to just own the individual TIPS directly since I am manually building a long-duration ladder.

Overall, Vanguard entering a sector is a good thing, as more competition is better. Vanguard also recently announced new extremely short-term Treasury ETFs including the Vanguard 0-3 Month Treasury Bill ETF (VBIL), which are potential cash/T-bill alternatives.

Filed Under: Banking, Investing //

Vanguard CEO Salim Ramji Interview Highlights: What’s Next?

Posted on July 15, 2025 // 3 Comments

It has been almost exactly a year since Salim Ramji moved from Blackrock to start his new job as CEO of Vanguard (July 8, 2024, announced May 2024). I don’t think it is a coincidence that he has been doing a bunch of extended interviews recently, including this Economist article (paywall, archive), this Morningstar Long View podcast, and Bloomberg article (paywall, archive). As someone with the majority of their net worth inside a Vanguard brokerage account and inside Vanguard ETFs, it was good to hear Mr. Ramji’s outlook and reasonings.

The Economist article provided a nice high-level overview of Vanguard’s history and core values, written in a very “Economist” manner with an overall positive take. We also find that future expansion areas will include:

  • Fixed-income ETFs. Vanguard has already launched 6 new bond ETFs this year. “The fixed-income market is twice the size of the equity market. It is far more inefficient than the equity market…It is far less understood”.
  • Financial advice/wealth management. “The goal, he says, is to “democratise advice, just as we have democratised investing”.”
  • Access to private markets (in partnership with Blackstone). “Today the haystack includes private as well as public markets.”

The Morningstar podcast had a nice nugget that showed that (for now) there are still some limits to their growth aspirations:

  • No plans for a crypto ETF. No gold ETF. No silver ETF.

Ramji: It was pretty straightforward. Greg Davis, our CIO, and I had talked about it kind of early in my arrival. And at Vanguard, we like investments that deliver cash flow or have the prospect of delivering cash flow. That could be cash, could be bonds, could be equities, could, over time, if the circumstances are right, be private markets. We don’t like things that don’t. We don’t have a gold ETF. We don’t have a silver ETF. And so it’s a logical extension as to why we don’t have ETFs in other things that don’t either deliver cash flow or have the prospect of delivering cash flow. And that’s OK. The market’s well-served. Investors can decide. But we also want to be clear about what our own investing philosophy and investing thinking are. And we’re OK not being everything to everybody. And there are certain things that don’t fit our investment philosophy, or we don’t think we have particular scale or expertise in. And so I’d put some of those types of ETFs in that bucket.

The Bloomberg article added more context behind how he’s making all these changes. Vanguard (and its Board) has been shaking things up a bit internally, including hiring more outsiders into executive roles, and paying higher salaries to get them. Some long-time insiders got pushed out, and it’s hard to know the truth of how much the company has changed.

Ramji has been reaching out to acquaintances at banks and asset management companies. Insiders say Vanguard is offering pay packages that, while not quite New York-level, nonetheless amount to big money in Malvern. In some cases, Ramji is dangling seven-figure deals. “We’ve been able to attract people from other firms who have the same sense of mission,” he says.

Ramji has also worked to break down silos and speed up decision-making (the product-strategy team was flabbergasted when he okayed a new project within minutes, insiders say). The new HR boss arrived from Principal Financial, via Wells Fargo & Co. and HSBC Holdings Plc. In a departure, Vanguard has based its new head of public relations in New York, where it doesn’t have an office.

Multiple journalists suggest that Vanguard is getting into private markets because they need to have an expensive “high margin” option in order to subsidize the rest of the operations. Yes, that is how Fidelity and others do it, but that doesn’t mean that’s how Vanguard has to do it. Vanguard can offer a quality product “at cost”, even if it’s not always the absolute lowest cost, every time.

From my perspective way back in the cheap seats, I can see that change is definitely in the works at Vanguard but they are still at least saying the right things about maintaining the culture. I remain concerned but hopefully optimistic.

Filed Under: Investing //

MSCI World Stock Dividends vs. Earnings Drawdowns

Posted on July 14, 2025 // 3 Comments

Here is an interesting chart that shows the historical drawdown rates of dividends vs. earnings for the MSCI World index (which tracks large/mid-cap stocks on a global cap-weighted basis). Taken from the Mid-Year Investment Outlook 2025 from JP Morgan Asset Management. An excerpt (emphasis mine):

Income-oriented strategies are also likely to prove relatively defensive. In an earnings contraction, dividend growth typically pulls back by roughly half that of earnings, helping to buffer total returns from stock price drawdowns (see Exhibit 16). With payout ratios at low levels and corporates pulling back from capex, investors might expect even greater dividend resilience in a slowdown scenario today than has been typical historically.

I avoid daily market commentary and honestly don’t care if the NASDAQ closed up 1% or down 1% today, but these market insights can provide a nice overview of what people are worried about along with some thoughtful context.

Filed Under: Investing //

Best Interest Rates Survey: Savings Accounts, Treasury Bills, Money Markets, ETFs – July 2025

Posted on July 9, 2025 // 1 Comment

Here’s my monthly survey of the best interest rates on cash as of July 2025, roughly sorted from shortest to longest maturities. Banks and brokerages love taking advantage of our idle cash, and you can often earning more money while keeping the same level of safety by moving to another FDIC-insured bank or NCUA-insured credit union. Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you could earn from switching. Rates listed are available to everyone nationwide. Rates checked as of 7/9/2025.

TL;DR: Savings account interest rates are mostly stable (maybe a tiny bit lower on average), top rates are still those above 4.00% APY. Short-term T-Bill rates at around 4.3%. Top 5-year CD rates are ~4.25% APY, while 5-year Treasury rate is ~4%.

High-yield savings accounts*
Since the huge megabanks still pay essentially no interest, everyone should at least have a separate, no-fee online savings account to piggy-back onto your existing checking account. The interest rates on savings accounts can drop at any time, so I list the top rates as well as competitive rates from banks with a history of competitive rates and solid user experience. Some banks will bait you with a temporary top rate and then lower the rates in the hopes that you are too lazy to leave.

  • The top saving rate at the moment: HUSTL Financial at 5.00% APY (no min), a division of Vantage West Credit Union, member NCUA (and thus not a fintech). No direct experience with this one; wonder how long it will last? The “good/excellent” savings rate zone appears to be roughly 4% and above. CIT Platinum Savings is now at 4.00% APY with $5,000+ balance. There are many banks in between.
  • SoFi Bank is at 3.80% APY + up to $325 new account bonus with direct deposit. You must maintain a direct deposit of any amount (even $1) each month for the higher APY. SoFi has historically competitive rates and full banking features. See details at $25 + $300 SoFi Money new account and deposit bonus.
  • Here is a limited survey of high-yield savings accounts. They aren’t the top rates, but a group that have historically kept it relatively competitive such that I like to track their history. I’d call this the “okay/good” zone of 3.50%+.

Short-term guaranteed rates (1 year and under)
A common question is what to do with a big pile of cash that you’re waiting to deploy shortly (plan to buy a house soon, just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.

  • No Penalty CDs offer a fixed interest rate that can never go down, but you can still take out your money (once) without any fees if you want to use it elsewhere. Marcus has a 7-month No Penalty CD at 4.15% APY ($500 minimum deposit) and 13-month at 4.00% APY. Farmer’s Insurance FCU has a 9-month No Penalty CD at 4.25% APY ($1,000 minimum deposit). USA USALLIANCE Financial CU has a 11-month No Penalty CD at 4.20% APY ($500 minimum deposit).
  • Eagle Bank has a 12-month certificate at 4.45% APY ($1,000 min). Early withdrawal penalty is 90 days of interest.

Money market mutual funds
Many brokerage firms that pay out very little interest on their default cash sweep funds (and keep the difference for themselves). Note: Money market mutual funds are highly-regulated, but ultimately not FDIC-insured, so I would still stick with highly reputable firms.

  • Vanguard Federal Money Market Fund (VMFXX) is the default sweep option for Vanguard brokerage accounts, which has an SEC yield of 4.23% (changes daily, but also works out to a compound yield of 4.31%, which is better for comparing against APY). Odds are this is much higher than your own broker’s default cash sweep interest rate.
  • Vanguard Treasury Money Market Fund (VUSXX) is an alternative money market fund which you must manually purchase, but the interest will be mostly (100% for 2024 tax year) exempt from state and local income taxes because it comes from qualifying US government obligations. Current SEC yield of 4.18% (compound yield of 4.26%).

Treasury Bills and Ultra-short Treasury ETFs
Another option is to buy individual Treasury bills which come in a variety of maturities from 4-weeks to 52-weeks and are fully backed by the US government. You can also invest in ETFs that hold a rotating basket of short-term Treasury Bills for you, while charging a small management fee for doing so. T-bill interest is exempt from state and local income taxes, which can make a significant difference in your effective yield.

  • You can build your own T-Bill ladder at TreasuryDirect.gov or via a brokerage account with a bond desk like Vanguard and Fidelity. Here are the current Treasury Bill rates. As of 7/8/25, a new 4-week T-Bill had the equivalent of 4.30% annualized interest and a 52-week T-Bill had the equivalent of 4.11% annualized interest.
  • The iShares 0-3 Month Treasury Bond ETF (SGOV) has a 4.18% SEC yield (0.09% expense ratio) and effective duration of 0.10 years. SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a 4.15% SEC yield (0.136% expense ratio) and effective duration of 0.15 years. The new Vanguard 0-3 Month Treasury Bill ETF (VBIL) has a 4.19% SEC yield (0.07% expense ratio) and effective duration of 0.10 years.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. If you redeem them within 5 years there is a penalty of the last 3 months of interest. The annual purchase limit for electronic I bonds is $10,000 per Social Security Number, available online at TreasuryDirect.gov.

  • “I Bonds” bought between May 2025 and October 2025 will earn a 3.98% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More on Savings Bonds here.
  • In mid-October 2025, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will post another update at that time.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops which usually involve 10+ debit card purchases each cycle, a certain number of ACH/direct deposits, and/or a certain number of logins per month. If you make a mistake (or they judge that you did) you risk earning zero interest for that month. Some folks don’t mind the extra work and attention required, while others would rather not bother. Rates can also drop suddenly, leaving a “bait-and-switch” feeling.

  • OnPath Federal Credit Union (my review) pays 7.00% APY on up to $10,000 if you make 15 debit card purchases, opt into online statements, and login to online or mobile banking once per statement cycle. Anyone can join this credit union via $5 membership fee to join partner organization. You can also get a $100 Visa Reward card when you open a new account and make qualifying transactions.
  • Genisys Credit Union pays 6.75% APY on up to $7,500 if you make 10 debit card purchases of $5+ each per statement cycle, and opt into online statements. Anyone can join this credit union via $5 membership fee to join partner organization.
  • La Capitol Federal Credit Union pays 5.75% APY on up to $10,000 if you make 15 debit card purchases of at least $5 each per statement cycle. Anyone can join this credit union via partner organization, Louisiana Association for Personal Financial Achievement ($20).
  • First Southern Bank pays 5.50% APY on up to $25,000 if you make at least 15 debit card purchases, 1 ACH credit or payment transaction, and enroll in online statements.
  • Credit Union of New Jersey pays 6.00% APY on up to $25,000 if you make 12 debit card purchases, opt into online statements, and make at least 1 direct deposit, online bill payment, or automatic payment (ACH) per statement cycle. Anyone can join this credit union via $5 membership fee to join partner organization.
  • Andrews Federal Credit Union pays 5.50% APY (down from 6%) on up to $25,000 if you make 15 debit card purchases, opt into online statements, and make at least 1 direct deposit or ACH transaction per statement cycle. Anyone can join this credit union via partner organization.
  • Find a locally-restricted rewards checking account at DepositAccounts.

Certificates of deposit (greater than 1 year)
CDs offer higher rates, but come with an early withdrawal penalty. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider building a CD ladder of different maturity lengths (ex. 1/2/3/4/5-years) such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account. When one CD matures, use that money to buy another 5-year CD to keep the ladder going. Some CDs also offer “add-ons” where you can deposit more funds if rates drop.

  • Mountain America Credit Union (MACU) has a 5-year certificate at 4.25% APY ($500 minimum), 4-year at 4.20% APY, 3-year at 4.15% APY, 2-year at 4.00% APY, and 1-year at 4.20% APY. Early withdrawal penalty for the 4-year and 5-year is 365 days of interest. Anyone can join this credit union via partner organization American Consumer Council for a one-time $5 fee (or try promo code “consumer”).
  • Lafayette Federal Credit Union (LFCU) has a 5/4/3/2/1-year certificates at 4.28% APY ($500 min). Slightly higher rates with jumbo $100,000+ balances. Note that the early withdrawal penalty for the 5-year is a relatively large 600 days of interest. Anyone nationwide can join LFCU by joining the Home Ownership Financial Literacy Council (HOFLC) for a one-time $10 fee.
  • You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. You may need an account to see the rates. These “brokered CDs” offer FDIC insurance and easy laddering, but they don’t come with predictable early withdrawal penalties. Right now, I see a 5-year non-callable brokered CD at 4.05% APY (callable: no, call protection: yes). Be warned that both Vanguard and Fidelity will list higher rates from callable CDs, which importantly means they can (and will!) call back your CD if rates drop significantly later.

Longer-term Instruments
I’d use these with caution due to increased interest rate risk (tbh, I don’t use them at all), but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10 years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable early withdrawal penalties. You might find something that pays more than your other brokerage cash and Treasury options. Right now, I see a 10-year CDs at 4.00% (non-callable) vs. 4.33% for a 10-year Treasury. Watch out for higher rates from callable CDs where they can call your CD back if interest rates drop.

All rates were checked as of 7/9/25.

* I no longer recommend fintech companies due to the possibility of loss due to poor recordkeeping and lack of government regulation. (Ex. Evergreen Wealth at 5% APY is a fintech.)

Photo by insung yoon on Unsplash

Filed Under: Banking, Deals & Offers, Investing // Tagged:

MMB Portfolio Dividend & Interest Income – 2025 Q2 Update

Posted on July 6, 2025 // Leave a Comment

Here’s my 2025 Q2 income update as a companion post to my 2025 Q2 asset allocation & performance update. Even though I don’t focus on high-dividend stocks or covered-call income strategies – I still track the income from my portfolio as an alternative metric to price performance. The total income goes up much more gradually and consistently than the number shown on brokerage statements, which helps encourage consistent investing. Here’s a related quote from Jack Bogle (source):

The true investor will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies. – Jack Bogle

Stock dividends are a portion of profits that businesses have decided to distribute directly to shareholders, as opposed to reinvesting into their business, paying back debt, or buying back shares. They have explicitly decided that they don’t need this money to improve their business, and that it would be better to distribute it to shareholders. The dividends may suffer some short-term drops, but over the long run they have grown faster than inflation.

Here is the historical growth of the S&P 500 total dividend, which tracks roughly the largest 500 stocks in the US, updated as of 2025 Q2 (via Yardeni Research):

Tracking the income from my portfolio. Three of the primary income “trees” that distribute income in my portfolio are Vanguard Total US Stock ETF (VTI), Vanguard Total International Stock ETF (VXUS), and Vanguard Real Estate Index ETF (VNQ).

In the US, the dividend culture is somewhat conservative in that shareholders expect dividends to be stable and only go up. Thus the starting yield is lower, but grows more steadily with smaller cuts during hard times. Companies do buybacks as well, often because they are easier to discontinue. Here is the updated 2010-2025 chart of the trailing 12-month (ttm) dividend per share paid by the Vanguard Total US Stock ETF (VTI) via WallStNumbers.com.

European corporate culture tends to encourage paying out a higher (sometimes even fixed) percentage of earnings as dividends, but that also means the dividends move up and down with earnings. The starting yield is currently higher but may not grow as reliably. Here is the updated 2010-2025 chart of the trailing 12-month (ttm) dividend per share paid by the Vanguard Total International Stock ETF (VXUS).

In the case of Real Estate Investment Trusts (REITs), they are legally required to distribute at least 90 percent of their taxable income to shareholders as dividends. Historically, about half of the total return from REITs is from this dividend income. Here is the updated 2005-2025 chart of the trailing 12-month (ttm) dividend per share paid by the Vanguard Real Estate Index ETF (VNQ). I extended this one out because the history was available to go beyond the 2008 Financial Crisis.

The dividend yield (dividends divided by price) also serve as a rough valuation metric. When stock prices drop, this percentage metric usually goes up – which makes me feel better in a bear market. When stock prices go up, this percentage metric usually goes down, which keeps me from getting too euphoric during a bull market.

Finally, the last income component of my portfolio comes from interest from bonds and cash. Vanguard Short-Term Treasury ETF (VGSH) and Schwab US TIPS ETF (SCHP) are example holdings, with the actual amount varying with the prevailing interest rates, the real rates on TIPS, and the current rate of inflation.

Dividend and interest income yield. To estimate the income from my portfolio, I use the weighted “TTM” or “12-Month Yield” from Morningstar (checked 7/3/24), which is the sum of the trailing 12 months of interest and dividend payments divided by the last month’s ending share price (NAV) plus any capital gains distributed (usually zero for index funds) over the same period. My TTM portfolio yield is now roughly 2.61%.

In dividend investing circles, there is a metric called yield on cost, which is calculated by dividing the current dividend by the original purchase price. In other words, while my portfolio yield today is 2.61%, that is because the current market price is also a lot higher. The yield-on-cost based on say 10 years ago, may be on the order of 5% or so. 2.61% may not seem like a lot today, but as you watch it grow it feels very powerful.

What about the 4% rule? For big-picture purposes, I support the simple 4% or 3% rule of thumb, which equates to a target of accumulating roughly 25 to 33 times your annual expenses. I would lean towards a 3% withdrawal rate if you want to retire young (closer to age 50) and a 4% withdrawal rate if retiring at a more traditional age (closer to 65). I don’t enjoy debating this number. It’s just a quick and dirty target to get you started, not a number sent down from the heavens! You will always have time to adjust later.

During the accumulation stage, your time is better spent focusing on earning potential via better career moves, improving your skillset, networking, and/or looking for asymmetrical (unlimited upside, limited downside) entrepreneurial opportunities where you have an ownership interest.

Our dividends and interest income are not automatically reinvested. They are simply another “paycheck”. As with our other variable paychecks, we can choose to either spend it or invest it again to compound things more quickly. You could use this money to cut back working hours, pursue a different career path, start a new business, take a sabbatical, perform charity or volunteer work, and so on. You don’t have to wait until you hit a magic number. Our life path is very different because of this philosophy. FIRE is Life!

Filed Under: Goals, Investing, Retirement //

MMB Portfolio Asset Allocation & Performance – 2025 Q2 Update

Posted on July 2, 2025 // 7 Comments

I try to limit checking my portfolio to once a quarter, and this is my 2025 Q2 update that includes our combined 401k/403b/IRAs and taxable brokerage accounts but excludes our house and side portfolio of self-directed investments. Following the concept of skin in the game, the following is not a recommendation, but a sharing of our actual, imperfect DIY portfolio.

“Never ask anyone for their opinion, forecast, or recommendation. Just ask them what they have in their portfolio.” – Nassim Taleb

How I Track My Portfolio
Here’s how I track my portfolio across multiple brokers and account types:

  • The Empower Personal Dashboard real-time portfolio tracking tools (free) automatically logs into my different accounts, adds up my various balances, tracks my performance, and calculates my overall asset allocation daily. Formerly known as Personal Capital.
  • Once a quarter, I also update my manual Google Spreadsheet (free to copy, instructions) because it helps me calculate how much I need in each asset class to rebalance back towards my target asset allocation. I also create a new sheet each quarter, so I have a personal archive of my net worth dating back many years.

2025 Q2 Asset Allocation and YTD Performance
At the top of this post are updated performance and asset allocation charts, per the “Holdings” and “Allocation” tabs of my Empower Personal Dashboard.

The major components of my portfolio are broad index ETFs. I do mix it up a bit around the edges, but not very much. Here is a model version of my target asset allocation with sample ETF holdings for each asset class.

  • 35% US Total Market (VTI)
  • 5% US Small-Cap Value (AVUV)
  • 20% International Total Market (VXUS)
  • 5% International Small-Cap Value (AVDV)
  • 5% US Real Estate (REIT) (VNQ)
  • 20% US “Regular” Treasury Bonds and/or FDIC-insured deposits (VGSH)
  • 10% US Treasury Inflation-Protected Bonds (SCHP)

Big picture, it is 70% businesses and 30% very safe bonds/cash:

By paying minimal costs including management fees, transaction spreads, and tax drag, I am trying to essentially guarantee myself above-average net performance over time.

I do not spend a lot of time backtesting various model portfolios. You’ll usually find that whatever model portfolio is popular at the moment just happens to hold the asset class that has been the hottest recently.

The portfolio that you can hold onto through the tough times is the best one for you. I’ve been pretty much holding this same portfolio for 20 years. Check out these ancient posts from 2004 and 2005. Every asset class will eventually have a low period, and you must have strong faith during these periods to earn those historically high returns. You have to keep owning and buying more stocks through the stock market crashes. You have to maintain and even buy more rental properties during a housing crunch, etc. A good sign is that if prices drop, you’ll want to buy more of that asset instead of less. I don’t have strong faith in the long-term results of commodities, gold, or bitcoin – so I don’t own them.

Performance details. According to Empower, the S&P 500 bounced back from it’s earlier drop and foreign stocks continued their excellent performance this year (up over 18% YTD). Rather refreshing that international diversification is boosting my portfolio returns instead of dragging them down! 🌍

Over the last quarter, here’s a Growth of $10,000 chart courtesy of Testfolio for some of the major ETFs that shows the difference in performance in the broad indexes:

As is usually the case, just a few buy transactions to reinvest excess dividends and interest towards rebalancing the portfolio. No sell transactions at all.

I’ll share about more about the income aspect in a separate post.

Filed Under: Goals, Investing, Retirement //

US Asset Valuations vs. Rest of the World (Last 30 Years)

Posted on June 29, 2025 // 3 Comments

If you enjoy finance charts as I do, I recommend following Callum Thomas of TopDownCharts either via X/Twitter or weekly e-mail newsletter. One of the recurring themes recently is the extended outperformance of US assets vs. the rest of the world. But importantly, a good portion of this outperformance is due to an increase in valuation, meaning folks are paying a higher price per dollar of earnings. That’s not the same as the price increasing simply because earnings are higher.

This chart shows how US asset overall are at higher relative valuations:

This chart shows the relative valuation trends (US over ex-US, Growth over Value, and Large-cap over Small-cap stocks):

Find more interesting charts in their recent 10 Charts to Watch in 2025 (half-time) post.

What does this all mean? Mostly it’s just an interesting part of history to me. Roughly 2/3rds of my stock holdings are US and I’m not selling any of it, so I’m not making a contrarian bet or anything. However, I do think that remaining diversified with exposure to the rest of the world is the way to go. Nearly all Target Date Funds in 401k plans are already diversified in this manner. A lot can happen in the next 30 years.

Filed Under: Investing //

UBS Global Investment Returns Yearbook: 125 Years of Market History (1900-2025)

Posted on June 26, 2025 // 3 Comments

The 2025 edition of the UBS Global Investment Returns Yearbook is available for free download in a 22-page PDF with 10 Key Insights on the UBS website. This annual publication provides an excellent “big picture” overview of the last 125 years of market history, and serves as a partial antidote to all the junk we are bombarded with about what happened in the the last 24 hours.

UBS Global Investment Returns Yearbook documents long-run returns on stocks, bonds, bills, currencies and other assets since 1900. Its goal is to inform investors about long-run historical performance, to interpret it, analyze it, learn from it, and help illuminate current concerns.

I definitely recommend downloading the report and at least scrolling through the historical charts and headline insights. The lessons may be familiar, but they are a good reminder of what builds wealth over the long run.

  • The composition of the stock market changes significantly over time.
  • Stock outperformance over bonds and cash over the long run is huge.
  • Patience is required to capture this outperformance from stocks.
  • Diversification can help, but it’s not guaranteed.

Filed Under: Investing, Retirement //
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