Top Money Market Fund Rates

This article discusses top money market fund rates. Timing investments is more important in picking a money-market fund than choosing the best yield over a short period of time, which is the rate usually advertised. Criteria:
Best performance over the last two years. Cur¬rent average maturity of securities in fund's portfolios.

How to use the information: The average maturity of securities is used as an indicator of what will happen to interest rates in the near future. When maturities shorten: Interest rates may rise. When maturities lengthen: Interest rates may be about to fall.
Simple strategy for individual investors:
Pick a fund with short maturities when interest rates are rising. Go into a fund with longer maturities when rates are going down. Reason: As interest rates fall, the assets in the money fund's portfolio appreciate, which means increased income for the fund when these assets are sold.

Safety of money funds: Many potential money-fund investors shun the funds because there is no Federal Deposit Insurance Corporation-type protection, as there is for bank deposits. Reality: There is little risk. No fund is allowed to have more than 5 % of its assets in a single security. Massive multi-bank¬ruptcies and defaults on government debts would have to precede a money-fund collapse.
Conservative strategy: Investors who feel ner¬vous about funds invested in offshore certifi¬cates of deposit can stick with funds that invest in nothing but Treasury bills (T-bills) or in repur¬chase agreements from banks (so-called repos, which are backed by T-bills). Other funds pledge not to invest in anything foreign. See money market fund for more information.
Check services and service charges. As a guideline to good service: Some funds invest your money the day your check arrives.

To Top Money Market Fund Rates - Top

Minimum initial investment: None, to over $3,000. Subsequent deposits also may be limited:
Over $100 or over $500. Key: You won't get the high yield on all your money if you can't put together the minimum amount quickly.
Checking privilege: Some charge for the service, others do not. The minimum check can be $250, or it can be $500 or more, depending on the fund. A lower minimum allows a family more flexibility.
Bottom line: A bigger annualized rate of return on your money is possible this year if you are willing to switch from one money fund into another, and back and forth to equity funds occasionally. (Some 80 to 100 funds offer convenient switch services.)
Fund size: It's unimportant. Frequently, the best performers are the leanest, because they're the fastest-moving.

When to avoid bond mutual funds: Bond mutual funds, either corporate Ot municipal bond funds, are probably not a good deal unless the management fee charged by the fund is very low (Y2 % or less). They do provide diversification, but for most investors, buying the bonds directly through a broker is cheaper. One-time sales commission on a pur¬chase of $25,000 worth of bonds is about $125. Fund annual management fees can be as much as $250/year on same-sized purchase. Exception: Money market funds provide more services and are worth the fees.

Source: Consumer Information Center

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