A large portion of the argument is the demand for T -
bills from money market funds sending T - bill yields temporarily below 1 %, and settling yesterday a little above 3 %.
With the lower minimums for the Target Retirement funds, you can now get your feet wet in stocks and bonds with only $ 1,000, so consider exchanging at least that
much from your money market fund into a Target Retirement fund soon.
They still manage to generate about $ 5,000 each in interest
income from money market funds and high interest savings accounts and their total investment income from dividends and interest on the account is $ 160,000.
Alternatively, you could make all automatic contributions to a money market fund, and then periodically (e.g., every 3 months) move
cash from the money market fund into the stock and bond funds that are below their target allocations.
(I believe this strongly enough that, for example, I simply couldn't sleep any longer until I switched my US brokerage a / c balance
sweep from a money market fund to a bank deposit).
In effect, when compared to the end of March 2009 figures above, there was roughly a 6 percentage point total value shift in favor of stock funds and a 1 percentage point shift in favor of bond funds — all
away from money market funds.
«The declines reflect the seizing up of the credit market and withdrawals of
monies from money market funds, which held $ 700 billion of commercial paper at the end of the second quarter,» wrote Tony Crescenzi, chief bond market strategist, Miller, Tabak & Co. in New York in an email note.
This is done by redeeming the required number of
units from the Money Market Fund at the applicable unit value, and allocating new units in the Classic Opportunities Fund or Frontline Equity Fund at the applicable unit value.
Although theoretically you are likely to get a higher return exchanging
everything from the money market fund to the Target Retirement Fund today, emotionally this is very difficult for many people to do (including me).
Exchange $ 1,000
from the money market fund into whichever Target Retirement fund has the asset allocation that best matches your risk tolerance, then don't look at your account for 3 months.
Repeat every 3 months, increasing your target value by $ 1,000, until you've exchanged everything
from the money market fund to the Target Retirement fund.
With over 60 different funds available,
from Money Market Funds to specific industry sectors, there's a TD Mutual Fund that may be right for you.
One other point I should mention is that «switching»
from the Money Market fund, once sufficient CESG grant has been accumulated in that fund, to an e-series fund is not considered a pre-authorized purchase, and a minimum purchase of $ 100 of a fund is required.
Over the last week, big banks and companies have withdrawn $ 37.5 billion
from money market funds that invest in Treasury debt and other ultra-safe securities, the biggest weekly drop this year.