After the credit crisis began to spread earlier last year and kicked financial exchange traded funds (ETFs) left and right, investors increasingly began to look toward traditionally “safe” investments – including money markets.
But this week, the Reserve Primary Fund “broke the buck” after its shares fell to 97 cents because of exposure to Lehman Brothers (LEH). Money market managers immediately rushed to reassure their investors that their money is safe. Still, it has investors asking what really is safe these days?
At least for now, the government is guaranteeing money market funds against losses up to $50 billion, giving short-term comfort to investors, reports Diana B. Henriques for the New York Times. These funds currently hold $3.4 trillion in investor funds, down nearly $170 billion from the week before. This temporary government move may help alleviate concerns for the time being.
Many financial advisors are agreeing that investors need to become their own chief investment officers as they look for safe havens, says Tara Siegel Bernard for the New York Times. Before you rush to pull your money out of money markets, though, it’s important to understand the differences.