Sunday, October 5, 2008

Tax-Exempt Money Fund – Enormous Yield?

For my long term savings, I keep about $5,000 in a Vanguard with all of it parked in a Tax-Free Money Market Mutual Fund. Much to my surprise, this month's interest payment is almost double last month's interest. Even without the tax benefit, it is yielding 5.67% on a 7-day basis according to Barron's. Clearly, the market is demanding a huge risk premium. Since this is my "safe money," I am considering moving it to the federal MM fund.

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