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Fidelity's Money-Market Fund Assets Surged 20% In Past Year
I’m curious what the reasons for the surge in money market funds might be. The return seems paltry. Over past year, money market mutual funds returned an average 1.97%. VG’s did slightly better at 2.35%. https://investor.vanguard.com/mutual-funds/profile/overview/VMMXX (Need to click on “Price & Performance”.)
Geez - Give me anything but one of these .... A night in Vegas? Online poker? Clean the attic and sell some antiques?
A couple alternatives to money market funds for folks with at least a few years time horizon and able to live with some principal fluctuation: TRBUX- one year 3.51%, DODIX - one year 8.17%
@ Hank: Thanks ! As a matter of fact I moved money out of MVRXX and bought additional CD's Over the next nintey days, I'll make about .25% more. Its not much, but I'd rather have the money in my pocket than the brokers. Regards, Ted
Hank, to address your question below, here is my perspective: The return of bond funds since the mid-Dec 2018 lows are primarily price-appreciation. Go take a look at the charts of quality bond funds/ETFs. Its like a rocket, and approaching (or at) long-term resistance levels. I don't find it probable that appreciation like we have seen can be extrapolated much further. At least not without some type of correction.
OTOH, as I scan current SEC yields of various quality bond ETFs today, I note AGG's yield is 2.47%, while ICSH's yield (an ultra-low duration bond ETF) is 2.62%. Meanwhile, AGG's duration is 6.0, while ICSH is 0.3.
Based on bond prices here and now (not from 8-9 months ago), cash & near-cash instruments look like a better risk/reward proposition at this time. Obviously, if Treasury yields head to 0%, I will be kicking myself.
Is there a link here? I’m curious what the reasons for the surge in money market funds might be. The return seems paltry. Over past year, money market mutual funds returned an average 1.97%. VG’s did slightly better at 2.35%. https://investor.vanguard.com/mutual-funds/profile/overview/VMMXX (Need to click on “Price & Performance”.)
Geez - Give me anything but one of these .... A night in Vegas? Online poker? Clean the attic and sell some antiques?
A couple alternatives to money market funds for folks with at least a few years time horizon and able to live with some principal fluctuation: TRBUX- one year 3.51%, DODIX - one year 8.17%
@Ted. Thanks for the link. Nice to know you’re “on the job.”
@Edmund - I agree with everything you said. Not recommending longer term bonds. I’m saying very few investors need the absolute, concrete, never-wavering NAV that money market mutual funds provide. The SEC mandated reforms following the ‘07-‘09 fiasco pretty much neutered these vehicles. They’re now so constrained as to what they can invest in that one might as well deposit the funds in a FDIC insured bank account.
Well-run ultra-short, TRBUX, is an excellent example of a “near cash instrument” to which you refer. It should net about 1% better over time than a money market fund with very minimal price fluctuation. It’s so stable you can use it as a checking account (I do). The other one I suggested, DODIX, is more volatile. Expect to lose 2-4% in the occasional off-year. But these are pretty smart investors (at D&C). They offer no money market fund and are not into taking big risks with this one. Not stable enough to write checks against, but very stable compared to most anything else in the investment universe. Personally, I maintain about a 50/50 blend of the two mentioned funds in my “cash” portfolio.
OK - 90 year old widows probably shouldn’t be taking any degree of risk with their cash stash. But for most of us there are better alternatives to money market funds.
Comments
I’m curious what the reasons for the surge in money market funds might be. The return seems paltry. Over past year, money market mutual funds returned an average 1.97%. VG’s did slightly better at 2.35%. https://investor.vanguard.com/mutual-funds/profile/overview/VMMXX (Need to click on “Price & Performance”.)
Geez - Give me anything but one of these .... A night in Vegas? Online poker? Clean the attic and sell some antiques?
A couple alternatives to money market funds for folks with at least a few years time horizon and able to live with some principal fluctuation: TRBUX- one year 3.51%, DODIX - one year 8.17%
Regards,
Ted
OTOH, as I scan current SEC yields of various quality bond ETFs today, I note AGG's yield is 2.47%, while ICSH's yield (an ultra-low duration bond ETF) is 2.62%. Meanwhile, AGG's duration is 6.0, while ICSH is 0.3.
Based on bond prices here and now (not from 8-9 months ago), cash & near-cash instruments look like a better risk/reward proposition at this time. Obviously, if Treasury yields head to 0%, I will be kicking myself.
@Edmund - I agree with everything you said. Not recommending longer term bonds. I’m saying very few investors need the absolute, concrete, never-wavering NAV that money market mutual funds provide. The SEC mandated reforms following the ‘07-‘09 fiasco pretty much neutered these vehicles. They’re now so constrained as to what they can invest in that one might as well deposit the funds in a FDIC insured bank account.
Well-run ultra-short, TRBUX, is an excellent example of a “near cash instrument” to which you refer. It should net about 1% better over time than a money market fund with very minimal price fluctuation. It’s so stable you can use it as a checking account (I do). The other one I suggested, DODIX, is more volatile. Expect to lose 2-4% in the occasional off-year. But these are pretty smart investors (at D&C). They offer no money market fund and are not into taking big risks with this one. Not stable enough to write checks against, but very stable compared to most anything else in the investment universe. Personally, I maintain about a 50/50 blend of the two mentioned funds in my “cash” portfolio.
OK - 90 year old widows probably shouldn’t be taking any degree of risk with their cash stash. But for most of us there are better alternatives to money market funds.