Newby confused by Vanguard "sweep out" ... (2024)

[2019 thread bumped in 2024 --admin LadyGeek]

I opened a Vanguard Roth for my young adult child last year. I didn't do anything with the money and thought it was in a money market. I went in today to buy some funds, and I see that less than a dollar is in the money market, the rest was "swept out" shortly after I opened it. I started to read here and it looks like the settlement fund is a holding account, which is fine except I can't figure out how to access it online so I can buy funds for her. When I check "move money between accounts," it only shows Vanguard Federal Money Market (settlement fund) with the change in it. Please be gentle-- I know I'm being dense-- but the money doesn't show up when I click on accounts and the account with less than a dollar is the only one that shows up when I click that I want to purchase shares. (It then tells me, of course, that I don't have enough money to buy anything from there.) There are no other options. Where do I click on the online page to access that money? I'm really regretting opening this account; I opened an account with Fidelity for my other kid and the interface is so much easier.

Are any investments other than the MM fund showing up? After you've logged in, go under the My Accounts tab and click Balances & Holdings, and that should list everything in the account.

VG's Federal MM Fund is the default sweep account. Sweep Out means that money got taken out of that fund and either withdrawn from the account entirely, or used to purchase another investment within the account. If no transactions were ever made outside of the initial deposit, everything should still be in the settlement fund. My guess is that you opened the account and started with all the money in the settlement fund, then you transferred everything to a different MM fund (probably Prime MM). Since interest in MM funds accumulates daily, the very small amount of interest you earned while the money was still in the settlement fund got paid at the end of the month, which accounts for the small change currently in there.

Note: "Move money between accounts" didn't work, because that's only for transferring between different accounts (e.g. IRA and taxable brokerage), rather than making transactions within a single account.

I just googled "what does vanguard mean by sweep in and sweep out" and Google brought me here, specifically to response by GAAP. Thank you; it's beautifully clear.

I wish Vanguard would post an explanation like that prominently on its site -- or simply use plain language in the first place. The terminology and design of Vanguard's website is extremely unintuitive. If there has to be a transit place for funds being moved from one place to another, which most of us have not encountered before, why not call it something clear? Instead of "sweeping" in and out of a "settlement fund," couldn't we "deposit" and "withdraw" from a "transition" fund? Or something similarly intuitive? The only high-level somewhat clear statement of what's going on in our accounts is the monthly statement, for which we have to wait until the next month to find. And it's not intuitive to find it, either. I am frustrated every time I go to the site.

taluliula wrote: ↑Fri Feb 16, 2024 12:57 pmI just googled "what does vanguard mean by sweep in and sweep out" and Google brought me here, specifically to response by GAAP. Thank you; it's beautifully clear.

I wish Vanguard would post an explanation like that prominently on its site -- or simply use plain language in the first place. The terminology and design of Vanguard's website is extremely unintuitive. If there has to be a transit place for funds being moved from one place to another, which most of us have not encountered before, why not call it something clear? Instead of "sweeping" in and out of a "settlement fund," couldn't we "deposit" and "withdraw" from a "transition" fund? Or something similarly intuitive? The only high-level somewhat clear statement of what's going on in our accounts is the monthly statement, for which we have to wait until the next month to find. And it's not intuitive to find it, either. I am frustrated every time I go to the site.

It's "swept" because Vanguard has a cash-sweep feature that not all of the institutions offer anymore. Vanguard's website is one reason I no longer have any money there -- although I do use their ETFs.

taluliula wrote: ↑Fri Feb 16, 2024 12:57 pm...why not call it something clear? Instead of "sweeping" in and out of a "settlement fund," couldn't we "deposit" and "withdraw" from a "transition" fund? ...

The finance world does have it's own lingo and "sweep accounts" are common terminology. As an investor, you just have to get used to that terminology (bid/ask spread, long position vs short sale, 7-Day SEC yield for Money Markets vs 30-Day for Bond funds, puts & calls rather than buying & selling for options, "in-the-money" for an option market price being above/below the strike price, etc.).

I don't know why finance folks need all this extra terminology compared to everyday people's terms for the same things, but then again I've heard Innuits have like 30+ names for different varieties of snow; it's all just snow.