Thursday, September 18, 2008

Money Market Funds – Avoid Losses

For people with significant savings in money market accounts, I strongly recommend you make sure you know what your fund invests in. For very little upside (often a few basis points), your fund may be invested in things like Lehman paper. A few days ago, a prominent money market fund "broke the buck" subjecting its clients to losses. While they did not suffer major losses (about 1%), they did suffer losses. To avoid them, look for a money market fund at your brokerage that only invests in government securities. Alternatively, many brokerages have the ability to purchase federally insured CD's on your behalf.

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