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Best Online Savings & Money Market Account Rates 2024

Best Online Savings & Money Market Account Rates

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Money Market Fund Yields May Fall to Less Than 0%

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Money market funds invested in Treasuries will provide a negative return to investors if the Fed cuts rates next week, as its widely expected to do. This will be the first time this has ever happened. It's another

Money market funds that invest the bulk of their cash in treasury bills may provide a negative return to investors if the Fed cuts rates any further. Low Fed Funds Rates combined with a rush to own the safety and security of treasury bills have pushed the yield on T-bills down to 0%. Money market funds that invest in Treasury Bills therefore receive a 0% return, or a very low return from their investment. Once the expenses of running the money market are factored in, the actual return of the fund will be less than 0%.

A Bloomberg article on this says:

'Record-low yields on government debt have already led money-market funds to waive fees to keep returns positive. If the Federal Open Markets Committee, as expected, cuts its target rate, some Treasury funds may allow returns to turn negative, said Peter Crane, president of Crane Data LLC, a money-fund research firm in Westborough, Massachusetts.

“No one has ever paid above and beyond their interest income to be in a fund,” Crane said. “But if we see another cut, we’ll likely see negative yields."'

If returns turn negative, Crane believes that the funds will cover the shortfall by charging customers in the form of monthly fees. The end results would be a negative return for investors. This is different from a money market fund breaking the buck. When a fund breaks the buck, the value of its assets fall, wiping out some of the principal of the money market. That is what happened to the Reserve Primary Fund (RFIXX) when it lost considerable money due the bankruptcy of Lehman Bros.

Remember, this would only happen to money market fund that invest primarily in US Treasuries. The BestCashCow Money Market Fund Rate Table lists several funds that are far above 0%, the highest paying 2.57%. This is a far cry from September when the collapse of Lehman froze the money markets and drove yields up to the 4-5% range.

The question is how long will Treasuries stay below 0%. Even if the Fed drops the Fed Funds rate to 0%, some believe that Treasury yields will still rise. Bill Gross, manager of the world's biggest bond fund had this to say on Bloomberg TV:

"“Treasuries have some bubble characteristics, certainly the Treasury bill does. A Treasury bill at zero percent is overvalued. Who could argue with that in terms of the return relative to the risk? There is no return.”

After bank deposit accounts and treasuries, money market funds are considered the safest and most liquid places to store money. Despite being safer than money market funds, bank savings and money market accounts pay far more interest. For example the top savings account on the BestCashCow rate table pays 4.00% APY why the top money market fund pays 2.57%.

Money market funds, which are not FDIC insured should be not confused with money market accounts, which are.


Merrill CEO John Thain Requests $10 Million Bonus

I'm filing this one under careers. At least the guy has chutzpa. Merrill Lynch, one the largest brokerage firm in the world, lost billions in his one year in office, and was quickly sold off to Bank of America, but the Wall Street Journal is reporting that CEO John Thain still requested a $10,000,000 bonus. Hmmm.

Curious about this, I called a compensation expert to her take on it. She told me that often executive compensation contracts do include provisions for bonuses despite corporate performance. "They're just part of how the salary is structured." But she also added that "it goes against compensation based philosophy. A bonus should be based on success and what has been achieved to warrant the bonus."

So let's give Thain the benefit of the doubt and assume that the bonus was written into his contract. Maybe he even had a $20 million bonus coming due and is only requesting $10,000.000. It still brings up two other points:

1. In the book Good to Great, the business book by Jim Collins that analyzes the traits of successful executives and companies, he identifies a categorizes executive manageent on a 1-5 scale. Level 5 executives are the best and the ones that consistently produce value. According to the book, a Level 5 executive would not accept a $10,000,000 bonus in a year when his or her company is doing so poorly. It would go against their personal ethos of leadership, sacrifice, and company first.

2. John Thain must have a tin ear if in the midst of the greatest financial crisis since the Great Depression, at a time when his company needed to be bailed out, he is asking for $10,000,000. And once again, what does that say about his management skill?


Etrade Offering Up to $500 Cash To Open Account

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Online brokers are stepping up in a bid to grab customers amid a volatile market. Etrade is offering up to $500 cash for users who join its Power ETrade program.

Etrade$500CashOfferOnline brokers are stepping up in a bid to grab customers amid a volatile market. TD Ameritrade recently came out with an offer of 30 days of free trades and $100 cash top open a brokerage account. Now, Etrade is offering up to $500 cash for users who join its Power ETrade program.

To be eligible, you must first become a member of Power Etrade. To qualify, you must execut at least 30 stock or options trades per quarter. If you deposit $50,000+ at Etrade and do at least 30 trades per quarter, the price per trade is $9.99. So, to become a Power Etrade customer you have to plan on spending a minimum of $300. If you planned on doing a lot of trading anyway, this is no big deal. If you're a one stock a year kind of investor, this deal may not be for you.

So, assuming you become a Power Etrade customer, you then will receive the cash credit based on how much you deposit. The schedule is below:

Deposit Cash Credit

$250,000+ $500

$100,000 - $249,999 $250

$25,000 - $99,999 $100

$1,000 - $24,999 $1

I'm not even sure why they bothered with the lowest tier unless there was some regulatory requirement.

I have a regular, non-Power Etrade account and have been generally pleased with it. In addiiton, to their brokerage account, Etrade also offers a competitive savings rate with a $1 minimum balance.