Best plan of action for your money- Stay Put
By Consumers Union on Monday, September 29th, 2008
We understand that it is nerve wrecking to hear about bank failures and government bailouts, but rest assured, your money is safer where it is than in a shoebox under the bed.
In addition, the US Treasury Department recently announced that for the next year it will temporarily guarantee the holdings of any publicly offered eligible money market mutual fund that pays a fee to participate in the program. The temporary guarantee will be based on the amount that a shareholder held in an eligible fund at the close of business on September 19, 2008. This should rest your mind at ease.
Money market funds are regulated by the Securities and Exchange Commission and are generally very safe investments because they strive to preserve a $1 asset value per share, meaning that you can always get back your principal. There have been only two times in history that a fund has dipped below $1 per share. Now, with the temporary Treasury guarantee, if your money is in an eligible money market fund and the asset value of the fund dips below $1 you will be immediately notified that the fund has triggered the insurance program. So be certain, your money is safe.
The Treasury published the following eligibility guidelines for funds:
• Funds that are publicly offered and registered with the Securities and Exchange Commission are eligible.
• Both taxable and tax-exempt money market funds are eligible. (The Treasury and the IRS ensure that the temporary guarantee will not affect the tax-exempt status of tax-exempt funds.)
• The temporary guarantee will be based on the amount that a shareholder held in an eligible fund at the close of business on September 19, 2008.
The Treasury will be releasing more details in the coming days. Check the Treasury’s website for updates.
There is no need to move your money to the shoebox under your bed. You can be sure that your deposits are safe, your securities are safe and your money market funds are safe. The risk of theft means your money is not safe at home. In these tumultuous times, don’t check your 401(k) plan every day. We advise that you check it twice a year to make sure your investments are in line with your stage in life. Beyond that just keep a level head and keep your money where it is.