02.28.2007 - Wednesday Open Thread
This is your open thread for Wednesday, February 28, 2007. You may post random links and off-topic discussions here.
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6 comments:
Random question, because I have a nut in one of these; if the market tanks - how safe is a Money Market account?
Is the only risk that the rate of return can be adjusted down, or is there a risk of losing money, say if the bank goes bankrupt?
I'm not a banker, but as I understand it there are two different types of "money markets":
1) Money market deposit accounts. This is the kind you have with a bank... one of the most secure ways you can keep your money and get a decent return. The bank should have a public notice that it's FDIC insured, which should protect you in the event that the bank goes bankrupt.
2) Money market mutual funds. These are considered the safest kind of mutual fund to own, but they are not insured and *can* decline in value. Most people's 401k plans have these as an option (i.e. Fidelity and Principal both offer them).
Bankrate.com had an article explaining the difference awhile ago... might be worth googling if you're concerned.
Thanks, I found the bankrate.com article, if anybody else cares to give it a read.
As a portfolio analyst for a money market mutual fund, I would say that it would be very hard to lose principal. I believe in the money market mutual fund history, there has only been one fund to lose principal, and that was a fraud case. In a MM fund you are buying mostly treasuries and agencies (Tier 1 securities) at a weighted maturity range of ~50-60 days. If these fail, losing principal will be the least of everyone's worries.
Though I am by no means an expert in money market accounts, I think their big selling point is FDIC protection, so you should be ok in a bank insolvency case.
"Is the only risk that the rate of return can be adjusted down, or is there a risk of losing money, say if the bank goes bankrupt?"
The MMA is secured up to 100k per account. You shouldn't keep more than 100k in each account, you can open up mult. accounts with one bank, but that can get confusing. It wouldn't really be a safe bet on returns either, if the bank bk's, their rates probably haven't been that great in the leading months/years up to that.
Extra, Extra, Read all about it!!!!!!!!
Hey, check this out -In case you haven't seen it already.
Published shortly after noon today on the seattle time website:
http://tinyurl.com/2bqvek
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