| Over the long haul, the stock market has | | | | should be noted that money markets always |
| historically provided roughly an 8 % return per | | | | maintain a $ 1 per share cost, and issue interest |
| year. This is a statistic that has been tracked | | | | on this per share basis. |
| since the Great Depression of 1929. However, | | | | Although most money market funds issues by |
| during this period of time, we have seen some | | | | government or big corporations are typically not |
| major bear markets with spikes downward. One | | | | guaranteed, most issued by banks are typically |
| of these downward spikes which has been | | | | FDIC-insured, which makes them backed by the |
| extremely evident, occurred recently during the | | | | Federal government. Specifically, these are the |
| turbulent financial credit crisis of 2008. It certainly | | | | ideal money markets to invest in. Although |
| is not mandatory for investors to remain in | | | | non-bank issued funds have been historically |
| stocks during these horrific financial times, as | | | | uninsured, since the mammoth financial credit crisis |
| there are other safer instruments that are | | | | of 2008, the government is now guaranteeing |
| available and should be utilized during these periods | | | | them for the next year (at least), with a |
| of uncertainty. | | | | dedicated $ 50 billion dollar emergency pool. This |
| Money market instruments are an excellent and | | | | guarantee was devised since a well-known money |
| viable choice during these volatile times, to help | | | | market mutual fund (the Reserve Primary Fund), |
| preserve capital, and to provide almost | | | | broke the sacred $ 1 per share paid by investors |
| instantaneous access to these funds (usually you | | | | of this fund. Since the fund was unable to cash |
| can gain access within 2-3 business days), should | | | | out investors who requested liquidations, due to |
| the need arise. By definition, money market | | | | the fund's exposure to failing Lehman Brothers' |
| instruments are short-term debt securities (which | | | | Holdings debt, the government stepped in to calm |
| typically mature in under one year), and are | | | | the anxiety of money market investors |
| typically considered to be almost equivalent to | | | | (currently, over $ 3.3 trillion is invested in these |
| cash, since you can liquidate them quickly to "cash | | | | funds in the U.S.). This was only the second time |
| out". Money market instruments are usually | | | | in U.S. history that the "breaking of the buck" had |
| considered to be very safe instruments, and are | | | | ever occurred. |
| usually issued by financial institutions, | | | | Given the government's assurance that all money |
| mega-corporations, or by the U.S. government | | | | market funds will be guaranteed by the |
| itself. For the consumer, the quickest way to gain | | | | government for the forseeable future, and that |
| access to these investment vehicles, are through | | | | most bank-issued funds are insured by the FDIC |
| money market mutual funds through your | | | | to the new limits of $ 250,000 ($ 500,000 for |
| brokerage account, or via money market bank | | | | joint account holders), these instruments offer an |
| accounts. | | | | excellent, liquid place to park one's money, during |
| Historically, money market rates have increased | | | | trying, turbulent financial market times. Although |
| and decreased in unison with shifts of | | | | you will not see gains in money markets like you |
| government fiscal policy and resultant interest | | | | will see gains in stock market index funds (over |
| rates. In the last 20 years, we have seen money | | | | the long haul), the use of these instruments |
| market rates in excess of 6 %, and as low as | | | | provide an excellent vehicle for cash preservation |
| close to 0 %. With interest rates at the low end | | | | for those who need cash in the short-term, and |
| of the historical curve these days, money market | | | | or for those looking to preserve their capital in a |
| instruments are at their historical lower end. It | | | | downward-spiking financial market. |