Here's a follow up question:
I currently have my cash in Vanguards Prime Money Market.
As Want2retire mentioned above, this "money market funds" are not (FDIC) insured.
Should i be concerned about this enough to move it back to a "money market account" at my local bank where it is FDIC insured.
Or are "money market funds" protected in some other way that makes them ok?
Currently they are protected by a government insurance scheme announced this week. Up until now, they were not protected but had never lost money, and it is not known how long the new government protection will last, but I shouldn't worry.
Recently VG issued
assurances on its MMF.
The recent bankruptcy filing by Lehman Brothers Holdings Inc. and widespread turbulence in the financial markets have prompted a number of questions about the impact on Vanguard funds, including money market funds.
Vanguard is confident in the stability of its money market funds, all of which are managed with the objective of maintaining a stable net asset value of $1 a share. Vanguard continues to manage its money market funds very conservatively and with extreme prudence, focusing on high quality, short-term money market instruments.
All of the investments in our money market funds are closely examined by our Fixed Income Group's highly skilled and experienced credit analysts. Analysts assess the quality of each underlying issuer through in-depth credit analysis and do not rely on agency credit ratings.
Our largest money market fund is
Vanguard Prime Money Market Fund, which currently holds more than half of its assets in U.S. Treasury and federal agency securities. In addition, Prime Money Market Fund has no exposure to money market instruments issued by securities dealers, including Lehman Brothers. It also has no exposure to securities of AIG, the insurance concern that is being supported by loans from the federal government.
Holdings of Vanguard Prime Money Market Fund (as of 8/31/2008)
U.S. Treasury: 36%
U.S. Agency: 17%
Certificates of deposit: 32%
High-quality commercial paper: 14%
Repurchase agreements: 1%