Money Market Funds: Time To Sell?

We are in an unusual situation as we are being paid well to take as little risk as possible with money market funds. This is because central banks have raised short-term interest rates to combat inflation. However, the situation will change. So in this video, we’ll gauge whether it is now time to sell our money market funds and buy bonds and if not how can we know when to switch?

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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.

[MoneyGist]

Something in me winces at the thought of cash being referred to as "safe" ☺

[tk]

Great content as ever - thanks. I think the big question is not the ultimate shape of the yield curve, but its level. I suspect the new norm for base rate will be a couple of % points lower than that pre Global Financial Crisis. If you were to believe that hypothesis then you would be more likely to swap from MMFs to Government Bonds now.

[danieldurling]

Do you have any thoughts on this new Free trade treasury bills buying they now offer?

[ivanbeacon]

Where & how do you buy single gilts, is there a code to search for

[cianog]

I’ve taken a break from working and put everything into MMFs via my ISA.

[Sorryishotyourdog]

Thorough and easy to understand. Great job

[Eddie.Mootsen]

Agree -> Wait for a stable uninverted yield curve & then buy single gilts

[DowntownR]

Ramin. Interest rates are not going to drop much if at all. Service inflation is too high and will only come down after unemployment spikes. If they cut IR too much then inflation will rip back and BoE will have to come back with no credibility and stick rates up very high. What a mess we are in!

[josepha]

Vanguard High-Yield Corporate bond fund 30-day SEC yield is 6.41%, I hold a smaller amount of shares in that plus my Federal MMF at 5.2%

[josepha]

If buying US Treasuries via Treasury Direct, you have to either hold to maturity or transfer the securities to your brokerage account. This is a pain in the neck, requires a signature guarantee from a bank and you then mail the form to UST which then transfers them. I just stay with MMFs here. Yield is fine, liquidity is excellent. If there is a rate cut in the US, it likely won't be a big one. Plenty of time to shift into a bond fund if that's what you want.

[reinvesting]

Dude, this is an excellent video. Your explanations are just so crystal clear and full of insights. I find myself relistening to your videos to gather all of your insights! Tremendously useful videos you are putting out. I'm going back to listen to all of them from the beginning!

[sak]

Im 65% in MMF and sleep very well at night. I don't see attractive options available right now - i get 5.27% in MMF - i cannot see stock market returns or bond returns getting meaningfully above that water mark.

[JevansUK]

My mmf holdings are on standby for paying down a portion of my mortgage in October so I assume I wouldn't have a any advantage in a short term pivot to another holding.

[hustlinhitch]

Which is better - holding money in a savings account with 4.2% interest or CSH2?

[onthebeachinsitges]

Perfectly timed. Not sure how to buy single bonds in practice

[jamesbartholomew]

Surely you need to move into bonds BEFORE interest rates come down? I agree MMF rates are likely to come down slowly but if you wait, you'll have missed the chance to lock in decent bond yields. Unless of course you think gilt yields are going higher. Personally I'd rather lock in 4%-4.5% gilt yields now.

[danyunowork]

I'm thinking more in lines of what is safe given the world is teetering on the edge of recession? I don't think think any MM fund ever lost money except one during the GFC which got locked up and eventually settled for 98% so losing 2%?
Contrast that with my horrendous experience of moving to 'safe' bond funds. I know your video is actually about buying individual bonds, but not an option in my ISA / pension. I will easily stomach a 1% to 3% loss. But a bond fund, like you say with unknown expiry dates, can lose 20% because it includes future returns.

[baarbacoa]

I think de-globalization is a an inflationary process. So as long as that process continues money markets will continue to be a viable option.

[lifelessordinaryxyz]

So if I buy a longer dated Gilt. Won’t it go up in nominal value as Interest rates go back down. I guess I’m asking is there a play here to gain by holding gilts as interest goes down and sell before they mature?

[alexk]

Hi hope you are well - if I open a T212 account using your referral code do I still get the 1% cashback on ISA contributions promotion?