The article that I have chosen is Why Money Market Funds Break the Buck authored by Douglas Rice. I have chosen this article to share an insight into money market funds and debunk the stereotype that it matches bank accounts in keeping safe money. Whereas it has a track record of safety, it cannot be relied upon completely. The author refutes the claim that money market funds are completely safe place where one can keep money when it is not invested elsewhere. According to the author, money market funds is a low risk, low return investment which is not a safe way of keeping the money as thought by many. Many people believe that money market funds are a way of ensuring security for money to avoid losing the net asset value. The author, however, indicates that this is not always the case since money market funds are not FDIC insured and thus money can be lost.
The author gives reasons why money market funds are not the safest way to keep money. The first reason he gives is insecurity in the market. He indicates that while venture capitalists are aware that money market funds are not safe compared to using bank accounts, they still use it because they see it as close to the bank accounts. Even so, the events of 2008 did not support the belief that money market funds would break the bucks. After the Lehman Brothers Holdings Inc. filed for bankruptcy, the money market fund fell to 97 cents. Due to this, the debt owned by Lehman Brothers Holding was writing off. This acted as an eye-opener that money market fund has a potential of a bank run in markets. This event which was followed by another announcement of a fund that was liquidating because of redemption confirmed the doubt about security issues.
Delegate your assignment to our experts and they will do the rest.
The article can be retrieved from the link below:
https://www.investopedia.com/articles/mutualfund/08/money-market-break-buck.asp
