Concern about economic conditions is the reason for a rise in money market assets. Meanwhile, advisors say clients are showing interest in short-term bond exchange traded funds (ETFs). As more investors are looking for safe havens to stash their cash, many advisors are warning against getting too creative, hence, it is not time to panic, reports Murray Coleman for MarketWatch.com.
Several major financial service businesses have made moves to protect money market assets in recent months. Bank of America (BAC) has had cash infusions to keep the $1 share price. There is a $600 million reserve to help shore up a group of its money market funds.
A short-term bond fund run by General Electric’s (GE) GE Asset Management returned money to investors at 0.96 cents on the dollar, after losing around $200 million, mostly on mortgage-backed securities, reports Christopher Condon and Rachel Layne for Bloomberg. Enhanced cash funds usually invest in riskier assets, but offer higher yields than money market funds. The collapse of the subprime mortgage-backed market has driven down global debt prices as investors take refuge in all but the safest investments.
Short-term bond ETFs can offer a safe place to invest money, but it is important to know that they invest in high-quality government obligations. Also keep in mind that although they are fairly stable, their price does fluctuate, especially if you are used to a money market fund with a value of $1.00.
Some short-term bond ETFs include:
- iShares Lehman 1-3 Year Treasury Bond Fund (SHY)
- Vanguard Short Term Bond ETF (BSV)
- iShares Short Treasury Bond (SHV)
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.