What is the best investment choice for someone with 500k that wants 100% security, and whose liquidity needs allow them to only lock up the money for, at the most, one week at a time. Would something like a fidelity money market fund be appropriate? What is the risk of principal loss on this? I realize its not FDIC guaranteed, but what is the likelyhood of loss?
I have a lot of $ in ING Direct and HSBC. They consistently offer the highest money market rates with fairly low chances of going out of business. Famous last words.
I’ll give you 50% guaranteed- see, my uncle is a Nigerian Prince… 
But seriously, I have some in ING and some at CITI (but this one has fallen a lot in terms of APY), either way… I would not put it all in one place.
Well, for 100% security, you can have 10 accounts that are 50k each… that will give you some room to grow and FDIC insurance coverage. Why would you need 500k plus to be so liquid that you must move it on a week’s notice? Are you buying a home with cash sometime in the next few months? Or a really expensive one that you need a 500k down payment for? I’m not saying that you’re crazy; it’s just a little unusual sounding.
house with cash… and its not for me!!
In canada we have PC bank. Pays 3.05% interest on a daily bank account for values over $1 million though, under 1 mil its only 1% http://www.banking.pcfinancial.ca/a/rates/savingsPlusAccountRate.page
wherever you put it make sure you check the underlying investments on the fund…the other day I looked at a US Treasury Reserve fund (or so it was titled) and it contained no treasuries, just repo’s with big banks…although the odds are in your favor make sure you do the due diligence.
no such thing as 100% security. closest you will get is FDIC insured deposits - 1 week is very short notice. Even if it is for a house, closing takes several months usually. Yup best bets are spread between ING, HSBC and other high yielding demand deposit accounts. As you know keep each depository relationship below 100K.
I have my money in etrade at ~3%. Thinking of dumping the dda for a closed end muni fund to at least double the yield on a post-tax basis. I had another post about this.
C’mon - Fidelity money market (whatever the standard issue one that my wife has her money in) is pretty close to 100% for principal. Only one US fund has ever broken the buck (Community Bankers mutual fund, which is not Fidelity) and investors got 96 back. If Fidelity was getting close to it (they won’t I promise) there would be lots of warnings as they would be working to raise credit lines to ensure it didn’t.
What if you adjusted the historical returns all asset classes for inflation and then put them into a mean variance optimizer. Wouldn’t that be your best bet?
Most money markets are considered securities and therefore qualify for $500K in SIPC coverage. As far as losses within the fund, like JDV says, Fido and the big boys would never let a money market fall below $1 NAV anyways. They would pony up their own cash to keep that from happening like BoA and Wachovia did in November.
virginCFAhooker Wrote: ------------------------------------------------------- > What if you adjusted the historical returns all > asset classes for inflation and then put them into > a mean variance optimizer. Wouldn’t that be your > best bet? Not if you need at least 100% of your deposit on short notice. Most optimizers are designed to take advantage of expected returns, volatilities, and correlations over the long term. Over the short term, your volatilities may be minimized, but you can still get hit by it and end up with less than you started with. Also, historical performance may not represent future performance, again, especially over short term periods when we’re in a bear market.
Put it in 5 different monthly GIC’s at 5 different CDN banks - insured, guaranteed. (and guaranteed garbage returns too unfortunately)
I have most of my liquid assets split between 3 bank accounts, 3 brokerages, and 2 retirement plan administrators. Doesn’t include my wife’s multitude of accounts.
imoneynet.com is good site for money market rates. Fido is secure. FDRXX is one of their taxable money markets I use. ING is highest yielding of online banks right now I think and have emergency cash there.
Yep FDRXX is my wife’s. If it goes under, I’ll be sleeping on the couch for weeks.
I have all cash spread between FDRXX, FSLXX, FGRXX
The.Unit.Root Wrote: ------------------------------------------------------- > Most money markets are considered securities and > therefore qualify for $500K in SIPC coverage. As > far as losses within the fund, like JDV says, Fido > and the big boys would never let a money market > fall below $1 NAV anyways. They would pony up > their own cash to keep that from happening like > BoA and Wachovia did in November. That $500K goes towards your account as a whole. So if it is worth $1MM, then you are only covered to $500K. We have had a few clients think it was money market coverage only. Just an FYI, just in case…
amberpower Wrote: ------------------------------------------------------- > The.Unit.Root Wrote: > -------------------------------------------------- > ----- > > Most money markets are considered securities > and > > therefore qualify for $500K in SIPC coverage. > As > > far as losses within the fund, like JDV says, > Fido > > and the big boys would never let a money market > > fall below $1 NAV anyways. They would pony up > > their own cash to keep that from happening like > > BoA and Wachovia did in November. > > > That $500K goes towards your account as a whole. > So if it is worth $1MM, then you are only covered > to $500K. We have had a few clients think it was > money market coverage only. Just an FYI, just in > case… True, you get max $500k SIPC coverage, of which $100k can be cash. People are sometimes confused by considering money markets cash. Almost all of the large custodians have excess SIPC coverage upto the total account value. The excess coverage is from insurance companies though, so not quite the same as SIPC. None of this covers losses in the money market fund though like what happened in November, 2007.