Ultra-short bond funds, bank-loan funds, etc.
At Morningstar:
'Money Market Substitutes' Get Hit by Subprime Woes - Morningstar Fund Spy
At Morningstar:
'Money Market Substitutes' Get Hit by Subprime Woes - Morningstar Fund Spy
Even money market funds are not immune. I've heard on CNBC last week that a money market fund managed by a bank in Luxembourg lost about 26% of its value overnight...
I have a large amt of 401k money in Vanguard's Prime MM. I've asked several people if I need to worry and they said no. Vanguard has govt MM fund, but I can't move from one MM to another fund in the same low-risk category. I always thought that short of FDIC insured money in a bank the Vang Prime MM was as safe as it could get. Not so?
Issuer by %
Bankers Acceptances6.0%Certificates of Deposit49.9%Commercial Paper20.7%Other4.9%U.S. Government & Agency18.5%Yankee/Foreign0.0%Total100.0%
checked my 401k last night. Principal has separate MM and bond/mortgage funds. checked the holdings and if there is mortgage exposure, it's very little.
need to check my wife's now
I noticed how some ultra short bond funds like the Fidelity Ultra-short bond fund got hit pretty hard and pretty sudden - a very dramatic drop on 8/3/07. But has this really happened to true MM funds? I'm still seeing $1.00 price on mine.
The Fidelity Floating Rate High Income fund has also been bleeding pretty badly for over a month, but anyone using this as a MM fund should have known better. Any time there is a credit quality scare that fund gets clocked.
Audrey
I'll be darned if I want to begin my retirement discovering that my fixed funds are suddenly losing value like sand in an hourglass. Maybe one of these days I'll be more comfortable with this, but I haven't even received my first pension check yet (coming 9/1)!
I've just heard too many horror stories and personally know people who lost almost everything and had to start over at 58 or 59. Doesn't even matter what they were invested in. All that matters to my psyche is that they lost it at such a critical time in their lives and it changed the course of their future.
Maybe the forum needs to have a section titled scared silly (SS) or Chicken Little (CL) ! I admit it, all of the volatility and hype is scaring me. I will go over now and search for those cool-head and stay-the-course comments. I will read them and try to gear up so that someday I might be able to become more like them.
I guess my neighbors are used to it by now. I'm sure it is a funny sight from a nice air conditioned house looking out the window. I'm usually jumping around, waving my arms, and running at some point in most of my visits to the outside when it gets this deep into summer!
I went ahead and moved my Prime MM funds at Vanguard to their Treasury MM Fund (100% U.S. Government & Agency). A slightly lower yield than Prime MM but seems safer.
And then the news of money market funds having problems - at least Sentinel Management Group. Something is up..
I was just listening to a market person interview (forgive me I don't remember his name) and he was saying the market is being driven by emotion and not fundamentals. He also pointed to the "Sentinel" MM failure story as being false (it was not a MM fund that was having problems) to make his point.
He said he thought the market was a great buy here but cautioned that emotion can drive prices lower short term. I'm doing some nibbling here.
WHY is the market a great buy here?