In Light of Recent Events

This would be Reason I Love Vanguard #139. 

In past posts I’ve advocated on behalf of money market funds as a good place to store your emergency fund.  Lo and behold, one of the largest and oldest MMF’s “broke the buck” this week due to the collapse of Lehman Brothers and AIG, which naturally caused some skittishness in regards to MMF’s as a whole.  The goal of money market funds is to maintain a $1 NAV and give returns to investors in the form of interest from dividends and the like.  The meltdown this week caused Reserve Primary Fund to reduce its NAV to $0.97, only the second time a MMF has had to break the buck.

So as confident as I am in Vanguard Prime, I thought it was still worth a check.  So what do I find on the Vanguard homepage but this article giving an update and proclaiming a clean bill of health for its money funds.  Good on them for making the info easy to find.  This isn’t the first time they’ve anticipated information I was looking for.

The lesson here is keep your money market funds conservative.  You want your emergency fund to work for you and make money, but you want slow and steady, not the sort of volatility you expect from equities.

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1 Comment

Filed under finance

One response to “In Light of Recent Events

  1. the lehman brothers bankruptcy is having a much stronger effect than anyone anticipated.

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