Continue to say “no” to money market mutual finds

Closed my account during the 2008 financial crisis. The Reserve Prime fund ( which held too much Lehman Brothers bonds when Lehman’s went belly up) “broke the buck” precipitating a fear about other money market mutual funds “breaking the buck.”

I’ve declined to open another money market mutual fund since that crisis. And there is no reason to open such an account. The interest rates are anemic and there is no guarantee like the FDIC.

Frankly, there are still issues about money market mutual finds. The September 2011 issue of Consumer Reports’ Money Advisor provides the following:

If a European debtor nation defaults, “it could become problematic for American investors because these debts often find their way into money market mutual funds. With returns of essentially zero, there’s little reason to expose yourself to the possibility that a European default might cause your money market fund to ‘ break the buck’ – meaning that it’s net asset value falls below $1 a share. The last time that happened was in 2008, to a fund holding too much Lehman Brothers debt.”

Not good. 😦


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