Money Market losing value?

[jmjj215]

Has anyone ever heard of a money market that failed to maintain its dollar-per-share target and lost value? They're not FDIC insured, but I'm yet to hear of anyone ever losing money with one.

[sweeps]

According to this article, no retail investor has ever lost money in a MM fund.

[CRFSaver]

Breaking the buck is taboo in the 2A7 (money market) realm. Most times the investment manager will buy out the losing securities from the fund itself as there would be a run on the fund if they broke the buck. An example of this is in the late 90's, Strong Capital Management had to buy the commercial paper (about 70MM) from its money fund in order to maintain the 1.00 per share price when Mercury Finance declared bankruptcy all of a sudden.

One of the advantages of money funds comes from the fact that they are run under rule 2A7 of the securities and exchange act of 1934 (I believe). In traditional accounting, securities under 3 months in maturity are held at cost and amortized to maturity. 2A7 fund can hold their securities at cost for anything under 13 months. A slight advantage as even if a bonds market price would show a loss they do not have to report it and as long as they never sell the bonds will never realize it as well.


While there were not direct losses to retail investors, many of the investors in those money funds are mutual fund companies which is a retail investment. It has come close Jesse but hasnt happened yet. I see less chance of it happening in this day and age. Most of the money fund managers are quite sophisticated now.

[Ima saver]

I don't think it will ever happen. What are mutual fund money markets paying now? I can get 3.57 at a bank, so that is where mine is now.

[PRICEPLUS]

Nevere heard of it but I suppose it is possible.

[jmjj215]

Originally Posted by Ima saver

I don't think it will ever happen. What are mutual fund money markets paying now? I can get 3.57 at a bank, so that is where mine is now.

My MM fund at Paypal is giving 4.26% - not sure what other more standard places are giving (Vanguard, T. Rowe, etc.).

[Ima saver]

Wow I am learning a few things about pay pal. They have money market accounts too? Is it some type of bank? (sorry I am so stupid, but I am brand new to computers)

[jmjj215]

Um, they're not really a bank, although they're acting more and more like one every day. You can simply elect to have your account treated as a MM and your interest will start accruing (they pay dividends monthly).