Q. What's the important change to money market fund in 2016?
A. Starting from Oct 14, 2016, the SEC will start several new rules for money market funds -
Implications to Investors
Such changes could have profound impacts on millions of investors and 401(k) providers.
First, money market is no longer a safe haven. You might find at times when you need money from it, the money might not be available!
Second, some employers might decide to remove money market funds from 401(k) fund choices at all, because they may find it difficult to explain why sometimes you could take money out of your money market funds and sometimes you couldn't.
Without money market fund as an option, lots of 401(k) investors might be lost at deciding where to put their cash - now they could be forced to choose among stock and bond funds, instead of trying to time the market by moving money out of stocks and/or bonds and put in money market funds for a while, before putting the money back to investment in stocks and bonds.
Third, certain types of money market funds are except from the liquidity gates and redemption fees, but they offer lower yields Investors will be facing the trade-off: safety or return? You can't have both at the same time.
A. Starting from Oct 14, 2016, the SEC will start several new rules for money market funds -
- Cretain funds will be required to abandon their stable $1-a-share value
- Certain funds could temporarily suspend redemptions
- Certain funds could impose liquidity fees on investors withdrawing assets during volatile times
Implications to Investors
Such changes could have profound impacts on millions of investors and 401(k) providers.
First, money market is no longer a safe haven. You might find at times when you need money from it, the money might not be available!
Second, some employers might decide to remove money market funds from 401(k) fund choices at all, because they may find it difficult to explain why sometimes you could take money out of your money market funds and sometimes you couldn't.
Without money market fund as an option, lots of 401(k) investors might be lost at deciding where to put their cash - now they could be forced to choose among stock and bond funds, instead of trying to time the market by moving money out of stocks and/or bonds and put in money market funds for a while, before putting the money back to investment in stocks and bonds.
Third, certain types of money market funds are except from the liquidity gates and redemption fees, but they offer lower yields Investors will be facing the trade-off: safety or return? You can't have both at the same time.
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