Is my money safe in Vanguard Prime Money Market Fund?
August 3rd, 2010
It’s a money market account that is not FDIC insured. I put funds in Vanguard because it was getting much better interest than a bank, now I don’t know if it’s a good idea.
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No mutual funds are technical "FDIC" insured.
They are SIPC insured. Vanguard is SIPC insured and a very stable company. I personally wouldn’t worry (I actually have funds in their tax exempt accounts for the same purpose.
From the FDIC Website:
Securities you own, including mutual funds, that are held for your account by a broker, or a bank’s brokerage subsidiary are not insured against loss in value. The value of your investments can go up or down depending on the demand for them in the market. The Securities Investors Protection Corporation (SIPC), a non government entity, replaces missing stocks and other securities in customer accounts held by its members up to $500,000, including up to $100,000 in cash, if a member brokerage or bank brokerage subsidiary fails. For more information contact:
Securities Investor Protection Corporation
805 15th Street, NW Room 800
Washington, DC 20005-2215
202-371-8300
http://www.SIPC.org
Hope that helps.
Yes, a money market account is very safe, but does not pay well. I hope she has a diversified protfolio and that it is not all in the money market – it would lose a lot to inflation.
Yes it.is.. they are insured as mentioned in the above post..
SIPC protects the customer from loses in the event Vanguard goes belly up; it does not protect from deprecitation of the NAV of the moneymarket from going below a dollar. While it is not FDIC ensured there are strict regulations in terms of what can and cannot be held within moneymarkets.
Money markets are only able to hold the highest levels of short term debt, AAA and AA rated securities. A lot of ____ has to hit the fan before you’ll see a money market depreciate from 1, in fact only 1 retail money market has ever gone below 1, and that company isn’t around anymore.
While they don’t have FDIC insurance the risk(negligible) reward(about 7-10x what you get at a bank) tradeoff makes it worth your while to invest in moneymarkets vs bank interest.
contact Vangard and ask if their Prime MMF contains and parts of Sub Prime mortgages, CDO,s CLO,s, Credit Default swaps, etc Those MMF,s are NOW risky.
AAA Ratings are no longer Valid.