Are Money Market Funds Safe?

Money Market funds are designed to be a safe place to park your savings temporarily while offering immediate access and higher interest than you’d get with cash. But there are some worries that these funds could trigger a cash crash. In this video I look at whether money markets are safe and what could go wrong. The biggest risk isn’t what you might think!

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Timestamps
00:00 Intro
00:52 Money Market Bubble
01:32 Types
02:28 What’s in Them
05:16 Why Are They So Popular?
08:33 Safe
10:23 Tail Risks
16:15 Biggest Risk

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DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results

[Mongarnsamuel]

Biggest lesson i learnt in 2023 in the stock market is that nobody knows what is going to happen next, so practice some humility and low a strategy with a long term edge.

[Graemecrompton]

As always, the only reliable non-financial advice based commentary available online

[fusemunk]

The original Money Mark Fund in 1980's - Reserve Fund, was basically a bank account that gave limited chequing and a Debit Card (unusual in the USA) . The concept was that it could take a basic customers money and merge it with others, giving leverage to buy short investments at higher rate than an individual could on their own.

[daveharruk]

Thanks, and kudos for the way you've approached this subject - having watched other rather alarmist videos on certain other channels about this subject, it is good to have some commentary from someone with a cool head. Rather than a clickbait headline you actually answer the question you posed in a calm and considered way.

[MrHotrod]

“Consumer has simply not stopped spending” = record personal debt / Credit card debt in US…. Can’t go on forever.

[josepha]

Nice segment Ramin. So, in my US Vanguard Federal Reserve MM acct, monthly interest on 100k is about $550 a month. On 100k in my checking acct, monthly div was 90 cents. Yes, that's cents, not dollars. I'm not quite ready to go back into the stock market quite yet. Have been all out for past 16 months. Waiting on a good dip in the general markets. If there is one, will certainly scale in.

[mmabagain]

Currently my Vanguard MM is paying me 5.29%. That is over $2K per month and I'm happy with that. I'll be retiring in April of next year so I am not wanting to take much risk. If the MM payout drops below 4%, I will look at alternatives.

[lplate]

Great content as always. Love this channel.

[MATIvmr]

I only hold emergency fund in CSH2 MM, I’ll hold it until the rates will be at least 4% and more, and as soon as they’ll go below I’m pulling out

[nickchandra]

Very good explanation but one risk wasn't emphasized. These are equity liabilities for the issuer not debt liabilities. Debt liabilities have equity behind it to pay out in an insolvency but equity liabilities don't. Also there are no deposit guarantees by the government on these products. If you have money on deposit you have deposit protection. If you buy money market products your investment is unprotected. Deposit protection- In UK this is £85000. In US $250000 In Australia A$ 250000.

[festerarl]

Glad to see Dimson, Marsh and Staunton get (yet another) mention.... 😁

[flixmaster]

I use MM funds because we are actively house hunting and we don't want to pull our money from the market after a sudden crash. If you're nervous about MM, just do an FDIC high yield savings - they are very close to MM now.

[hxjohn]

Using CSH2 To hold as of This month 2 years of expenses for my planned retirement
Which is in around 2-3 years Time
Considering a bond ladder but I could continue working so The money market fund is more flexible hopefully it's a reasonably safe option
Ps Thanks for The video

[MagicNash]

Would love some sort of reminder type video about the 2008/2009 crisis in the format of how you linked to articles on FT in this video

[jeffocks]

Great video as always. I admit to skipping some beats on hearing about ceti changes and the removal of ringfencing in 2022 - I believe some return to over extended lending will return. Is the current consumer boom based on depleting savings or wage rises?

[MrNickml]

This video demonstrates why PensionCraft is growing a thriving community of people keen to learn and educate themselves on how to make better-informed investment decisions .. and with access to a toolkit of high quality, informative and well-balanced content ... keep up the excellent work Ramin!

[paul_k_]

Has anyone been to the shops recently? No one is buying anything, they are just window shopping. Not sure where this retail optimism comes from!

[jongreenwood]

Slightly alarmed that someone over 20 thinks a “normal level” for interest rates is 2-2.5%

[mohitsaraogi]

I want to understand bonds, SOFR yield curve, Money market funds, RRP in depth. How do I proceed?

[Bracebarian]

How are MM fund taxed in the UK if outside of and ISA or SIPP? Is it CGT or Income Tax?