Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. Welcome back, David.
David Nelson:
Thanks, Brandy. Welcome to the New Year. Thank you.
Brandy Auterson-Hurst:
Yes. Happy New Year to you. Hey, it seems like money market funds have been very popular lately. What are these, and what are you seeing in this space?
David Nelson:
So money market funds, very safe place, part cash. Basically you earn a decent rate of return these days, unlike it’s sitting in traditional, just like savings accounts. They hold T-bills, typically in short-term bonds, so it’s a quite safe investment to show just how popular they become. My chart today does a nice job illustrating that. And what it’s doing is it’s tracking the US retail money market balances going back to 1990. And as you can see, the balances tend to rise during periods of stress like 2001, 2008, when the stock market was kind of coming unglued and also during the pandemic.
What’s different today is the size of the move. Over the last few years, balances have really taken off. They’ve moved from basically a trillion dollars to over $2.2 trillion. And so the big driver, I guess, really centers around that they’re paying three and a half to 4% today, versus again, a traditional savings count where you’re picking up probably less than one half of 1%.
So it’s a pretty attractive alternative as far as today, for that short-term money need.
Brandy Auterson-Hurst:
Okay. So what should investor take away from this?
David Nelson:
Well, cash should be viewed as far as as a tool, and this should not be viewed as a long-term investment strategy, something that you want to own over a long period of time.
Brandy Auterson-Hurst:
All right, David, as always, thanks for joining us.
David Nelson:
Thank you.
Brandy Auterson-Hurst:
If you missed any of our discussion, we’ll make it available for you on ourquadcities.com.
Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal.
Indices mentioned are unmanaged and cannot be invested into directly.
This video includes a paid appearance.