In%20Stashing%20Cash%2c%20Look%20Ahead%20Article

In%20Stashing%20Cash%2c%20Look%20Ahead%20Article - Wall...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Wall Street Journal OPTIONS FOR SAVERS JUNE 3, 2011 In Stashing Cash, Look Ahead by Karen Damato When interest rates eventually rise, today's low-risk alternatives won't all fare the same The returns on low-risk savings these days range from just about zilch to a little more than nothing. With interest rates at rock bottom, money-market funds, bank accounts and ultrashort-debt funds have been cranking out uniformly terrible returns. But investors should remember a crucial fact: Rates won't stay low forever. And when they rise, low-risk vehicles may turn in very different results, since they have very different structures and investment philosophies. In looking at the various options, investors "should think about how they will perform with certain interest-rate changes," says Allan Roth, a financial adviser in Colorado Springs, Colo. Many economists believe in the first half of next year the Fed will start raising short-term interest rates from its current target range of 0% to 0.25%. And when the Fed does start raising rates, that might mean "hikes as far as the eye can see," says Peter Crane , president of Crane Data LLC, which tracks money funds. Between June 2004 and June 2006, the Fed's rate-setting committee boosted its target rate at 17 consecutive meetings. Here's a look at four low-risk alternatives for savings and how they could be affected by the next increase in rates. Money Funds There's nothing good to be said about the current yields on money-market funds, which are mutual funds that buy very short-term and high-rated debt. Among taxable money funds for individual investors, the average yield is just 0.01% a year, according to researcher iMoneyNet—only $1 a year on a $10,000 investment. The highest yielding of these funds is at just 0.11%, while the highest yield among tax-free money funds is 0.16%, a reflection of concerns about the finances of some states and municipalities.
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern