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Moving from my money market?

July 21, 2008

I’m considering moving some of my money from Vanguard’s Prime Money Market account to a high yield savings account (ING, HSBC, etc.). The rate is a little better, but it isn’t about that. It is about the FDIC insurance. I’m nervous that my money isn’t as safe in a money market account

Is this reasonable, or is this fear talking? I can’t tell. What do you think?

10 Comments leave one →
  1. July 21, 2008 12:05 pm

    I think it’s mostly fear, but if it will make you feel more comfortable there’s probably no reason not to move it (assuming the account is not in the red). Sometimes I want to move my retirement stuff to something safer, and I have to work hard to remind myself that I’m in it for the long haul…

  2. Andrew Stevens permalink
    July 21, 2008 4:40 pm

    Mostly fear. There has been exactly one time in history when a money market fund has ever “broken the buck” and lost money, and there has never been a time when a money market fund has gone completely bust (or even close, obviously). The one time was in 1994 when the $82 million Community Bankers U.S. Government Money Market Fund was liquidated and investors got 96 cents on the dollar. It was an institutional fund, so no individual investors lost money.

    Money market accounts, while not insured, is probably just as safe (due to regulations) as an FDIC insured account. However, if the rate is better in a high yield savings account, I see no reason why you shouldn’t move, especially if it will make you feel safer.

  3. July 21, 2008 5:02 pm

    If the rate is better and it is more secure then why not going for it?

  4. July 21, 2008 5:11 pm

    The reason I hesitate is because, on principle, I do not believe in rate chasing, and the MM has a consistently good rate, though rarely the best rate.

    We’ll see though. Good points.

  5. Brian permalink
    July 22, 2008 9:42 am

    You’re seriously scared that Vanguard will go out of business? Vanguard, the most fiscally responsible financial company in business today? The day that Vanguard collapses is likely a day that the FDIC is well tapped out and the US government has defaulted on its debts. I’m keeping my money at Vanguard.

  6. July 22, 2008 12:57 pm

    No, not worried about Vanguard going out of business, only about their money market being invested in something that isn’t stable/safe as I would assume. I am not the first person to ever have this concern.

    Though I didn’t really think it was a rational worry. If i was that fearful, I would have pulled my money out a long time ago.

    I just hate the climate in the financial markets lately.

  7. July 22, 2008 2:02 pm

    I just moved our emergency fund over to ING. I watched as my savings account rate at a small local bank dropped from about 2.5% to about .5% over the past year. I based my decision on: 1)Rate; 2)Ease of use; 3)and to differentiate our emergency fund from general savings. If the rate isn’t that big of a deal to you, then you are probably safe keeping it where it is.

    However, the current economic climate has me considering if I should keep a little more cold, hard cash on hand.

  8. July 22, 2008 10:49 pm

    Interesting comments.

    I have my EF invested in one of Fidelity’s money market accounts. I suppose I should check the rates and make sure I am getting enough bang for my buck. Not like any of us are going to get rich on a money market, but we might as well beat inflation, right?

  9. July 26, 2008 8:44 pm

    I wouldn’t worry, they are pretty solid and careful companies. I have both Vanguard and Fidelity.

  10. July 31, 2008 3:31 am

    Have you looked at the underlying investments that Vanguard holds in the Prime MM fund? I believe you’ll find they are pretty much all AAA or AA rated.

    I’m a big Bob Brinker fan and he consistently praises the Vanguard fund you are using. I would not be concerned about leaving my money there.

    That being said, I’ve held my liquid money at GMAC Bank (FDIC insurance 🙂 ) for the last several years. Their rates tend to be amongst the best.

    Good luck
    I’m Minding My Own Business, are you minding yours?

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