In Search of the Best Rated Money Market Funds

Unlike a money market account that you can obtain through your local bank and is a relatively safe vehicle for your savings, money market funds are tied directly to the markets and require the use of a brokerage service. While searching for the best rated money market funds, the one thing you will notice is that the interest rates paid are not competitive with those you will see with online savings accounts and money market accounts. In order to find the best rated money market funds you will need to look beyond short term interest rates and look at their overall performance.

Given the recent spate of financial house issues and the number of collapses in banks and investment companies, it can be difficult to know who to trust. Finding the best rated money market funds is going to take a little more research than simply asking your broker to find one for you. You need to compare things like their management fees, while not regulated they tend to average between 0.1 and 0.5%. If you find a fund that charges more you are paying too much, those funds with lower fees have been proven to perform the best.

With the number of people losing tremendous amounts of money in the subprime market due to investing in poorly rated funds, you need to ensure that the fund you invest in has rules in place to guarantee that only those funds with the highest ratings are used. On the 29th of September 2008, the Treasury Department passed a rule that was designed to protect investors in light of the tumbling markets, this rule guaranteed that funds would not drop below par value for one year. However, now that it has expired, investors have absolutely no insurance from the federal government or anyone else to protect the value of their money market funds.

Liquidity is a very important factor and you need to make sure that any fund you invest in maintains a large enough deposit of cash to pay out shareholders if they decide to sell out. This has been a major problem in recent years and has led to the collapse of certain companies as investors have tried to pull out in light of tumbling markets.

In your search for the best money market funds you will find that certain funds require minimum balances that are often quite large. Along with this you will also find that they often have specific sizes of deposits into your account and apply the same schedule to any withdrawals you make without having to pay a penalty.

Bottom line: with the temporary insurance having now expired, and with the secret change to money market rules, we feel much more comfortable keeping our money completely out of the hands of money market mutual fund managers, even if they are the best rated on Earth.