I'd like to optimize my portfolio and I stumbled upon money market funds. I've done some research and I believe I have a general understanding of how they work, but I have a question on expense ratios.
Hypothetically, I could be earning ~5% in TTTXX. As a treasury only MMF, it's my understanding that this would not be subject to state tax. However, it would be subject to a 0.17% expense ratio. I did read somewhere that expense ratio on a MMF applies on dividends only, is that correct?
For simple math, if I have $10,000 in TTTXX I would earn $500 in dividend interest. Would I pay 0.17% on $10,500 ($17.85) or on the $500 only ($0.85)?
A ($500-$17.85) * 0.78 = $376.08
Or B ($500-$0.85) * 0.78 = $389.34
In either case, it seems like it makes sense for my to ditch Ally in favor of TTTXX. Is there anything I'm missing with this strategy? submitted by /u/ElGrandeQues0
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Hypothetically, I could be earning ~5% in TTTXX. As a treasury only MMF, it's my understanding that this would not be subject to state tax. However, it would be subject to a 0.17% expense ratio. I did read somewhere that expense ratio on a MMF applies on dividends only, is that correct?
For simple math, if I have $10,000 in TTTXX I would earn $500 in dividend interest. Would I pay 0.17% on $10,500 ($17.85) or on the $500 only ($0.85)?
A ($500-$17.85) * 0.78 = $376.08
Or B ($500-$0.85) * 0.78 = $389.34
In either case, it seems like it makes sense for my to ditch Ally in favor of TTTXX. Is there anything I'm missing with this strategy? submitted by /u/ElGrandeQues0
[link] [comments]