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Most brokerage firms mail you a financial report on the money market
fund they use. They should invest in really short term paper to limit
risk. Not all funds are managed well or in a low risk manner. Losses
show up in the yield. Brokers don't really read the information on
their own money market funds. They are rated somewhere as to quality.
If you are really risk adverse there are money market funds that only
trade US gov. securities or you can buy T-Bills. That will keep you
busy. The insurance SIPC or additional insurance doesn't cover a lousy
manager of a money market fund. It covers fraud or the brokerage firm
going bust due to irregularities. Cash accounts get their money pretty
fast. Margin accounts will wait a lot longer than you will like.
I haven't been a broker since 1990 so some of this may have changed for
the better or worse. It is your money.
Jimmy
-----Original Message-----
From: _Craig [mailto:craigbud@xxxxxxxxxxx]
Sent: Wednesday, September 25, 2002 9:40 AM
To: omega-list@xxxxxxxxxx
Subject: OT: How safe are money market funds?
When I ask my brokers about money market funds, I get less than
satisfying answers. I ask them when I exit a position, where does my
money go? Where do they park my money? They say I get credit earning
interest in a money market fund. When I ask more specific questions
about this money market fund, they essentially say, "it's just a money
market fund."
Given the ongoing rumblings about US financial health, I've become more
curious about the true safety of these generic money market funds. Sure
we have the $500,000 SIPC, but when I ask for more details about their
additional insurance that covers up to several millions per account,
they say they don't have much information about it, if any.
I'm curious what people do here with their "parked" money. Are you
comfortable with what your brokers do with it on default? Do they give
you choices of funds (unlike my brokers), or do you do something more
proactive, like trading treasuries?
Thanks.
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