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Article Check - Investing Options Series: Money Market Funds
It may seem simple yet it is often times overlooked. When it comes to choosing the right Internet hosting provider for their websites, the majority of business owners or companies know very little about making the best Internet/web hosting decisions.What makes a good Internet/web hoster for a business website? What makes a bad one?How can the wrong Internet/web hoster help/harm your business?What are the different types of Internet/web hosting services? Which ones are best for which industries?Here are some tips to help you make the right decisions:1. Understand the distinctions between shared, collocated, unmanaged dedicated & managed dedicated hosting so you choose the one that is right for your business.It is crucial to understand the difference between the t
If your tax-exempt fund is also exempt from state income taxes, subtract your combined income tax rate from 100. For example, if your federal and state income tax rates sum up to 40% of income, your combined reciprocal-of-tax-bracket is 60.
Using the same formula, a 1.8% yield on the current tax-exempt fund has a combined taxable-equivalent yield of 3%.
Short or Long-Term Investment?
Definitely short-term! Money Market Funds are designed to be highly liquid – meaning that you could cash out in a matter of days. In fact, many investment firms allow you to write checks from your Money Market Fund or withdraw cash from an ATM.
Potential Risk
Since Money Market Funds are manag
The last 1.5 years have shown major changes in search engine behavior across the board. Algorithms change at random dates. Websites that ranked great in search results are suddenly completely wiped out from the search index. It becomes less and less predictable what a certain change to your website will get for results. A major change to a website or the way how it is promoted could have a major impact on search engine success for that website.Webmasters need to gear to up to stay ahead of the game. As changes cannot easily be reversed to re-establish search engine ranking a website could be dead in the water for 3-6 months before it eventually recovers. It might actually not recover at all and becomes dead internet real estate. The difficulty every webmaster is facing - each major search engine uses different criteria to judge a w
What Are They?
A Money Market Fund (not to be confused with a Money Market Deposit Account) is a type of mutual fund that maintains its value by purchasing short-term investments (maturing in less than one year) such as Treasury bills, short-term certificates of deposit (CDs), and short-term commercial debt. Money Market Funds are required by law to provide a safe and liquid investment while at the same time providing returns slightly higher than a run-of-the-mill passbook savings account. Money Market Funds are becoming increasingly popular and more widely available every year. Even PayPal has a Money Market Fund! In fact, at the end of 2003, money market mutual funds had nearly $2.3 trillion in assets, or 36% of the $6.39 trillion invested in all mutual funds, according to the Investment Company Institute (ICI), an industry group that represents mutual fund companies.
What is the Investment Strategy?
As mentioned above, Money Market Funds’ main strategy is to preserve your invested principal by keeping the net asset value (NAV or share price) around $1. Although Money Market Funds are not insured by the FDIC, no retailer has ever lost money in a Money Market Fund – which has made Money Market Funds infamous for low-risk investing. In fact, there has been just one case of a money market fund "breaking-the-buck," or dropping below its $1.00 share price. In 1994 an institutional money fund, Community Bankers U.S. Government Money Market Fund, liquidated at 94 cents a share due to extensive derivatives-related holdings.
Different Flavors
There are a number of different Money Market Funds mainly based on the type of short-term investments that are used as well as the amount of the fund that is used to invest in “illiquid” assets in order to try and earn a larger dividend. There are portfolios, for example, that only invest in T-bills or only invest in CDs and there are even state-specific portfolios. The type of underlying investment might not seem very important, but it impacts the yield percentage as well as the taxability of the fund.
Taxable Money Market Funds invest in securities whose income is not exempt from federal income taxes, including funds that invest principally in Treasury securities. Tax-exempt money market funds invest in short-term securities whose income is exempt from federal income taxes, such as bonds issued by state governments and municipalities. The yield on tax-free funds is normally lower than the yield on taxable fund which means that those in upper-income tax brackets will benefit the most from those tax-free funds. If you’re thinking about a tax-free fund take a look at your tax bracket, the state your in, and monitor the yields that are often more volatile in the tax-free funds.
In order to calculate the taxable-equivalent yield:
- Subtract your federal income tax rate from 100. For example, if you are in the 25% income tax bracket, the difference is 75. This figure is also called your reciprocal-of-tax-bracket.
- Divide the tax-exempt fund's yield by your reciprocal-of-tax-bracket. If the yield on a tax-exempt fund is 1.8% and your reciprocal-of-tax-bracket is 75, the taxable-equivalent yield is 2.4%.
In other words, you would have to earn a yield of at least 2.4% on a taxable money market fund to make the taxable fund more attractive than the tax-exempt fund.
If your tax-exempt fund is also exempt from state income taxes, subtract your combined income tax rate from 100. For example, if your federal and state income tax rates sum up to 40% of income, your combined reciprocal-of-tax-bracket is 60.
Using the same formula, a 1.8% yield on the current tax-exempt fund has a combined taxable-equivalent yield of 3%.
Short or Long-Term Investment?
Definitely short-term! Money Market Funds are designed to be highly liquid – meaning that you could cash out in a matter of days. In fact, many investment firms allow you to write checks from your Money Market Fund or withdraw cash from an ATM.
Potential Risk
Since Money Market Funds are manage
Is it an antique and is it worth anything? Would you know?At some point in our lives most of us are going to put in a position where we have to ask ourselves the question- Which of my treasured possesions should I keep because they might be worth something and which can I throw away?Would you know??We start our own homes full of enthusiasm and with all the lovely clutter that makes up our lives and that of the family, but as time goes on, the children leave home, we decide to move to a smaller house or maybe we decide to live abroad. At that stage we have to decide what to keep and what to part with.As an antique dealer for many years I'm often invited into homes to assist customers with just that question - or with a cry for HELP!!Well, we all have items we wouldn't part with for a million pounds, pr
What is the Investment Strategy?
As mentioned above, Money Market Funds’ main strategy is to preserve your invested principal by keeping the net asset value (NAV or share price) around $1. Although Money Market Funds are not insured by the FDIC, no retailer has ever lost money in a Money Market Fund – which has made Money Market Funds infamous for low-risk investing. In fact, there has been just one case of a money market fund "breaking-the-buck," or dropping below its $1.00 share price. In 1994 an institutional money fund, Community Bankers U.S. Government Money Market Fund, liquidated at 94 cents a share due to extensive derivatives-related holdings.
Different Flavors
There are a number of different Money Market Funds mainly based on the type of short-term investments that are used as well as the amount of the fund that is used to invest in “illiquid” assets in order to try and earn a larger dividend. There are portfolios, for example, that only invest in T-bills or only invest in CDs and there are even state-specific portfolios. The type of underlying investment might not seem very important, but it impacts the yield percentage as well as the taxability of the fund.
Taxable Money Market Funds invest in securities whose income is not exempt from federal income taxes, including funds that invest principally in Treasury securities. Tax-exempt money market funds invest in short-term securities whose income is exempt from federal income taxes, such as bonds issued by state governments and municipalities. The yield on tax-free funds is normally lower than the yield on taxable fund which means that those in upper-income tax brackets will benefit the most from those tax-free funds. If you’re thinking about a tax-free fund take a look at your tax bracket, the state your in, and monitor the yields that are often more volatile in the tax-free funds.
In order to calculate the taxable-equivalent yield:
- Subtract your federal income tax rate from 100. For example, if you are in the 25% income tax bracket, the difference is 75. This figure is also called your reciprocal-of-tax-bracket.
- Divide the tax-exempt fund's yield by your reciprocal-of-tax-bracket. If the yield on a tax-exempt fund is 1.8% and your reciprocal-of-tax-bracket is 75, the taxable-equivalent yield is 2.4%.
In other words, you would have to earn a yield of at least 2.4% on a taxable money market fund to make the taxable fund more attractive than the tax-exempt fund.
If your tax-exempt fund is also exempt from state income taxes, subtract your combined income tax rate from 100. For example, if your federal and state income tax rates sum up to 40% of income, your combined reciprocal-of-tax-bracket is 60.
Using the same formula, a 1.8% yield on the current tax-exempt fund has a combined taxable-equivalent yield of 3%.
Short or Long-Term Investment?
Definitely short-term! Money Market Funds are designed to be highly liquid – meaning that you could cash out in a matter of days. In fact, many investment firms allow you to write checks from your Money Market Fund or withdraw cash from an ATM.
Potential Risk
Since Money Market Funds are manag
If you write and publish eBooks, sooner or later you will probably be faced with a dilemma - should you create your eBooks as .exe files or .pdf files?PDF, which stands for Portable Document Format, is the file extension for files created with Adobe Acrobat.Exe, which stands for 'executable', is the extension for files created by eBook compilers.PDF is widely considered to be the 'industry standard' for eBook publishing, and for good reason. Here are some of the advantages of PDF files over exe files:(1) With most eBook compilers you have to set up each page of your eBook as a separate web page. With Adobe Acrobat you can use a single MS Word file as the source document.(2) PDF files automatically number each page - exe files don't.(3) PDF files are very easy to edit - you can insert pages, replac
Different Flavors
There are a number of different Money Market Funds mainly based on the type of short-term investments that are used as well as the amount of the fund that is used to invest in “illiquid” assets in order to try and earn a larger dividend. There are portfolios, for example, that only invest in T-bills or only invest in CDs and there are even state-specific portfolios. The type of underlying investment might not seem very important, but it impacts the yield percentage as well as the taxability of the fund.
Taxable Money Market Funds invest in securities whose income is not exempt from federal income taxes, including funds that invest principally in Treasury securities. Tax-exempt money market funds invest in short-term securities whose income is exempt from federal income taxes, such as bonds issued by state governments and municipalities. The yield on tax-free funds is normally lower than the yield on taxable fund which means that those in upper-income tax brackets will benefit the most from those tax-free funds. If you’re thinking about a tax-free fund take a look at your tax bracket, the state your in, and monitor the yields that are often more volatile in the tax-free funds.
In order to calculate the taxable-equivalent yield:
- Subtract your federal income tax rate from 100. For example, if you are in the 25% income tax bracket, the difference is 75. This figure is also called your reciprocal-of-tax-bracket.
- Divide the tax-exempt fund's yield by your reciprocal-of-tax-bracket. If the yield on a tax-exempt fund is 1.8% and your reciprocal-of-tax-bracket is 75, the taxable-equivalent yield is 2.4%.
In other words, you would have to earn a yield of at least 2.4% on a taxable money market fund to make the taxable fund more attractive than the tax-exempt fund.
If your tax-exempt fund is also exempt from state income taxes, subtract your combined income tax rate from 100. For example, if your federal and state income tax rates sum up to 40% of income, your combined reciprocal-of-tax-bracket is 60.
Using the same formula, a 1.8% yield on the current tax-exempt fund has a combined taxable-equivalent yield of 3%.
Short or Long-Term Investment?
Definitely short-term! Money Market Funds are designed to be highly liquid – meaning that you could cash out in a matter of days. In fact, many investment firms allow you to write checks from your Money Market Fund or withdraw cash from an ATM.
Potential Risk
Since Money Market Funds are manag
With everyone spending more than they save, it’s no wonder that credit card debt is at an all time high. But just because everyone else is in trouble doesn’t make it a non-issue. Credit card debt not only ruins your credit score, but it can also hurt your future and your sense of security as well.The precious credit scoreThe newest number that everyone is talking about is their credit score. With a good credit score, you can get better credit card offers, better interest rates for houses and cars, and you can get bigger loans than others with lower credit scores. And the truth is that most people don’t know what their credit score is.When you carry high balances on your credit cards, these balances are reported back to the credit reporting agencies that in turn make adjustments to your credit score. If you have l
In order to calculate the taxable-equivalent yield:
- Subtract your federal income tax rate from 100. For example, if you are in the 25% income tax bracket, the difference is 75. This figure is also called your reciprocal-of-tax-bracket.
- Divide the tax-exempt fund's yield by your reciprocal-of-tax-bracket. If the yield on a tax-exempt fund is 1.8% and your reciprocal-of-tax-bracket is 75, the taxable-equivalent yield is 2.4%.
In other words, you would have to earn a yield of at least 2.4% on a taxable money market fund to make the taxable fund more attractive than the tax-exempt fund.
If your tax-exempt fund is also exempt from state income taxes, subtract your combined income tax rate from 100. For example, if your federal and state income tax rates sum up to 40% of income, your combined reciprocal-of-tax-bracket is 60.
Using the same formula, a 1.8% yield on the current tax-exempt fund has a combined taxable-equivalent yield of 3%.
Short or Long-Term Investment?
Definitely short-term! Money Market Funds are designed to be highly liquid – meaning that you could cash out in a matter of days. In fact, many investment firms allow you to write checks from your Money Market Fund or withdraw cash from an ATM.
Potential Risk
Since Money Market Funds are manag
Have you ever felt like you’ve gotten in way over your head? When you first embark on an internet marketing venture, it’s perfectly normal to be overwhelmed. There is so much to learn, so many different things you can do to market a business online, and so many “experts” that claim they’ve got the “secret” to making money online. It can really be mind boggling at times.So, what’s the secret to internet marketing and making money online? Well, let me tell you, there is no secret. What there is though is information overload. There are tons of strategies for various types of internet marketing techniques and what works great for one business, might not work at all for another.So, rather than trying to “master the art” of internet marketing, it is best to get a quick overview of internet marketing techniques, decide which
If your tax-exempt fund is also exempt from state income taxes, subtract your combined income tax rate from 100. For example, if your federal and state income tax rates sum up to 40% of income, your combined reciprocal-of-tax-bracket is 60.
Using the same formula, a 1.8% yield on the current tax-exempt fund has a combined taxable-equivalent yield of 3%.
Short or Long-Term Investment?
Definitely short-term! Money Market Funds are designed to be highly liquid – meaning that you could cash out in a matter of days. In fact, many investment firms allow you to write checks from your Money Market Fund or withdraw cash from an ATM.
Potential Risk
Since Money Market Funds are managed in such a way as to minimize risk, the biggest risk involved in investing in Money Market Funds is the risk that inflation will outpace the funds' returns, thereby eroding the purchasing power of the investor's money. Fidelity also mentions that the price of a Money Market Fund could decrease due to a decline in the credit quality of an issuer (i.e. The U.S. Government can no longer honor T-bills). And, as mentioned previously, a Money Market Fund is not a deposit at a bank and is therefore not insured by the FDIC.
Potential Return
Money market funds have an average return of 4 to 6 percent a year – rivaling your savings account and even most short-term CDs. PayPal’s Money Market Fund, which they claim is the country’s highest yielding, had a 7-day average yield of 4.73% as of the date of this post. The interest of a Money Market Fund is calculated daily, but only paid out at the end of the month unless you sell the fund, then it is paid at that time. The graph below shows an example of returns from the PayPal Money Market Fund which sweeps the leftover PayPal funds of investors into a larger Money Market Fund.
These returns can be compared to the U.S. Treasury bill return over the past few years:
BankRate.com provides current Money Market Fund yields as well as graphs such as this one showing the yield comparison of the different flavors of Money Market Funds.
Who is this a Good Investment For?
In short, Money Market Funds are great for individuals looking for a safe and liquid short-term investment. Money market mutual funds are often used by people with brokerage accounts as a short-term holding place for money that's waiting to be invested in stocks, bonds or mutual funds. However, you must be aware of the expense ratio so that your interest revenue is not swept away from your brokerage firm.
If you’re looking to invest some cash for the short-term, Money Market Funds are an available option – but they are not the best option for most individual investors mainly due to the fact that other investment vehicles (CDs and Money Market Accounts) provide the same liquidity and safety while providing higher returns.
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