Money fund assets jumped in the last week of the year, moving above $3.6 trillion to their highest level since July 2009. Money fund assets have increased in 9 out of the last 11 weeks and in 16 out of the past 17 weeks. ICI's latest "Money Market Fund Assets" report shows that MMF totals have increased by $584 billion, or 19.2%, year-to-date in 2019. Over the past 52 weeks, ICI's money fund asset series has increased by $584 billion, or 19.2%, with Retail MMFs rising by $192 billion (16.4%) and Inst MMFs rising by $374 billion (20.0%).

ICI writes, "Total money market fund assets increased by $27.51 billion to $3.63 trillion for the week ended Tuesday, December 31, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $30.25 billion and prime funds decreased by $3.47 billion. Tax-exempt money market funds increased by $731 million." ICI's weekly series shows Institutional MMFs rising $21.3 billion and Retail MMFs increasing $6.2 billion. Total Government MMF assets, including Treasury funds, were $2.721 trillion (74.9% of all money funds), while Total Prime MMFs were $773.1 billion (21.3%). Tax Exempt MMFs totaled $137.6 billion, 3.8%.

They explain, "Assets of retail money market funds increased by $6.24 billion to $1.37 trillion. Among retail funds, government money market fund assets increased by $4.69 billion to $779.29 billion, prime money market fund assets increased by $1.05 billion to $464.66 billion, and tax-exempt fund assets increased by $498 million to $126.09 billion." Retail assets account for over a third of total assets, or 37.7%, and Government Retail assets make up 56.9% of all Retail MMFs.

The release adds, "Assets of institutional money market funds increased by $21.27 billion to $2.26 trillion. Among institutional funds, government money market fund assets increased by $25.56 billion to $1.94 trillion, prime money market fund assets decreased by $4.53 billion to $308.41 billion, and tax-exempt fund assets increased by $233 million to $111.54 billion." Institutional assets accounted for 62.3% of all MMF assets, with Government Institutional assets making up 85.9% of all Institutional MMF totals.

Money fund assets ended 2019 with their fastest growth rate and biggest asset increase since 2008. Assets increased by more than 2 1/2 times 2018's 7.2% gain. The prior seven years showed relatively flat growth with MMFs increasing by 4.1% in 2017, decreasing 1.1% in 2016, increasing 1.0% in 2015, increasing 0.5% in 2014 and 2013, and increasing 0.4% in 2012. In 2011, money fund assets fell by 4.1%. In 2009 and 2010, assets plummeted by 14.0% and 14.7%, respectively.

Our separate MFI Daily asset series shows money fund assets up $66.6 billion for the month of December to $3.977 trillion. Prime assets were up $699 million for the month, while Government assets jumped by $66.5B. Tax-Exempt MMFs inched down $611 million. For calendar 2019, total money fund assets jumped by $870.0 billion. (Note: Our MFI Daily totals were inflated by the addition of a number of funds, including the $108 billion American Funds Central Cash Fund.) Prime and Government MF assets were up $378.7 billion and $492.6 billion in 2019, respectively while Tax Exempt assets were down $1.3B year-to-date.

In other news, Kiplinger's Retirement Report posted the article, "Buttress a Nest Egg With a Cash Stash." It tells us, "As you enter retirement and start tapping your savings, most financial advisers recommend that you keep anywhere from one to three years' income in cash -- safe, easily liquid investments, such as money-market mutual funds, bank money-market accounts or certificates of deposit. Your longer-term investments, such as bonds for income and stocks for long-term gains, should be held in separate buckets."

Kiplinger's explains, "You'll need the cash bucket in case your riskier accounts, such as stocks or bonds, are in a bear market. If the stock market falls 12% in a year and you're withdrawing 5% a year, your account will be down 17%. If you take your money from your cash bucket, you'll give your stock account time to recover -- and avoid aggravating market losses with withdrawals."

The article says, "Next, try to get the highest yield possible. At the moment, any safe, highly liquid investment pays barely enough to feed a gnat. The average one-year bank money-market account, for example, yielded 0.73% at the end of October, according to Bankrate.com. The average bank money-market account yielded 0.21%. Neither is enough to overcome inflation, which has averaged 1.82% the 12 months ended October.... Aim for the highest yield you can get, without sacrificing safety or liquidity -- which gives you the ability to cash out quickly in a pinch."

It comments, "You can probably get at least 2% on your cash, if you shop around. At press time, for example, BMO Harris Bank offers a 2.05% money-market account, while TIAA Bank offers 1.85%. You won't be able to live on the interest from these accounts, but you'll have easy access to your money and beat inflation modestly. If you use bank CDs, don't lock into a term greater than one year -- these days, the additional interest you get from extending maturities is negligible. Bankrate's top-performing five-year CD recently yielded 2.25%, for instance."

Kiplinger's adds, "Money-market mutual funds are another solution. They aren't government guaranteed, but they have a good safety record and offer checking privileges, just like a bank. The average money fund yields 1.49%, while the top-yielding money fund, Vanguard Prime Money Market fund (symbol VMMXX), yields 1.76%.... In any event, it makes sense to have at least one year's worth of living expenses in a safe, liquid cash option. Manage it correctly and you won't have to worry about selling stocks in a bear market -- and making a bad situation worse."

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