Money Market Funds in a Low Rate Environment

After pushing interest rates gradually upward for three years, the Federal Reserve dropped the benchmark federal funds rate to near zero (0%–0.25%) in March 2020 to help mitigate the economic damage caused by COVID-19.1 The funds rate affects many short-term interest rates, including the rates on money market mutual funds, 哪些价格一开始就已经很低了.

The average monthly yield on 30-day taxable money market funds dropped steadily after the Fed's move and stood at 0.04% in November 2020, equivalent to an annual percentage rate of about 0.48%.2 Considering the rock-bottom rates on some short-term 投资s, this is higher than might be expected but well below the rate of inflation.3 即便如此,投资者仍持有超过4美元.3万亿的货币市场基金.4

What’s the appeal with such a low return? 稳定性和流动性.


Annual Returns on Money Market Mutual Funds

Annual returns on money market mutual funds: 2000=6%. 2001=4.5%. 2002=1%. 2003=0.5%. 2004=1%. 2005=3%. 2006=4.5%. 2007=4.5%. 2008=2%. 2009=0%. 2010=0%. 2011=0%. 2012=0%. 2013=0%. 2014=0%. 2015=0%. 2016=0%. 2017=0%. 2018=1%. 2019= 2%. 2020=1%. Figures rounded up to nearest half percent.

来源:Refinitiv, 2020, 30天货币市场指数-全部应课税, 从1999年12月31日至2020年11月30日. The performance of an unmanaged index is not indicative of the performance of any specific security. Individuals cannot invest directly in an index. Past performance is not a guarantee of future results. 实际结果会有所不同.


现金替代

Money market funds are mutual funds that invest in cash alternatives, usually short-term debt. They seek to preserve a stable value of $1 per share and can generally be liquidated fairly easily.

Money market funds are typically used as the “sweep account” for clearing brokerage transactions, and investors often keep cash proceeds in the fund on a temporary basis while looking for another 投资. 在动荡的市场中, it’s not unusual to see large shifts into money market funds as investors pull out of riskier 投资s and wait for an opportunity to reinvest.

Money market funds can also be useful to keep emergency funds or other funds that might be needed quickly, 比如房子的首付. 如果你已经退休或即将退休, it might make sense to use money market funds for near-term expenses and/or to hold funds in a traditional IRA for required minimum distributions, so you do not have to sell more volatile assets.

For a long-term investing strategy, however, money market funds are a questionable choice. You might keep some assets in these funds to balance riskier 投资s, but low yields over time can expose your assets to inflation risk — the potential loss of purchasing power — along with the lost opportunity to pursue growth through other 投资s. This could change if interest rates rise, but the Fed projects that the federal funds rate will remain in the 0% to 0.到2023年底,这一比例为25%.5

Money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your 投资 at $1.00 per share, it is possible to lose money by investing in such a fund.

共同基金按招股说明书出售. Please consider the 投资 objectives, risks, charges, and expenses carefully before investing. 招股说明书, which contains this and other information about the 投资 company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.