For the better part of a decade, money market funds have simply not been attractive to investors at all. These cash funds maintain a $1/share price and provide daily liquidity. Historically, investors have used them as a reserve for living expenses, emergency funds, short-term needs, etc.
With rates near zero for much of this time period, money market funds had little to offer in comparison to bank savings/checking accounts, online savings accounts, or even CDs. With the exception of online savings accounts, all of these products were essentially paying nothing in interest. But, over the last year money market funds have shown signs of life again.
For example, the Schwab Value Advantage Money Fund currently has a 7-day effective yield of 1.74% (no minimum balance). The Schwab Value Advantage Money Fund – Ultra Shares has a 7-day effective yield of 1.89% (this fund has a $1,000,000 investment minimum).
The Schwab funds’ rates are competitive with the highest yielding online savings accounts in the country. There are no lock-up periods on these money market funds and they provide daily liquidity. They must be bought and sold like a mutual fund, and the cash will be available the next business day.
*Schwab Money Market Funds are not FDIC insured. However, Charles Schwab is covered under the Securities Investor Protection Corporation (SIPC). To learn more about how client assets are protected at Schwab click here.