The Wall Street Journal asks "Do Money-Market Funds Still Make Sense?" The piece says, "For the past few years, investors could probably have made more money by picking up loose change from the sidewalk than by investing in a money-market mutual fund. Money funds are likely to regain appeal once interest rates rise again. Historically, when rates start moving upward, money-fund yields quickly follow, unlike those of bank savings accounts, which can lag. But for now, persistently low rates -- coupled with uncertainty about a possible regulatory overhaul for money funds -- are reasons to avoid using the funds for all but very-short-term parking of cash, financial advisers say.... The average yield on taxable money funds for individual investors is just 0.01% a year, according to Crane Data LLC of Westborough, Mass. On an investment of $10,000, that is $1 a year. Such low yields are unlikely to climb soon, as many market professionals think there is still too much economic uncertainty for the Federal Reserve to start raising short-term rates. Moreover, the reason money funds have been able to offer any yield at all in recent years is that management companies have been waiving billions of dollars in fees.... With the exception of the Reserve Primary Fund, money-market funds came through the financial crisis and other turmoil, including the European debt crisis and the U.S. federal-government shutdown, unscathed. But still the Securities and Exchange Commission is considering new regulations to avoid future runs on funds." The article quotes, Peter Crane, president of Crane Data, "A floating NAV would really harm one of the core features of money-market funds. Investors want the ability to transact and not have to worry about gains and losses, or not having the amount that you thought you had." The Journal adds, "The timing of any SEC action is uncertain."
