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Q. What is your opinion of the safety of money market mutual funds with brokerage firms and mutual fund companies? I realize these accounts are not FDIC insured. What I want to know is whether they will suffer in a negative economy as much as sector or other mutual funds?
A. Money market mutual funds are one of the safest investments around. Unfortunately, they are also one of the lowest-yielding. Last week, the average taxable money fund yield was a measly 1.27 percent a year.
Money funds are safer than other types of mutual funds because they invest only in very short-term income securities. The most conservative restrict their investments even further to government securities or Treasury bills.
When corporations or government entities default on their debt, money funds that own that debt will be affected. So far, however, no investors in a modern money fund have ever lost money because fund sponsors always have stepped in to bail them out. Allowing a money fund to dip below the standard price of $1 a share would be a marketing disaster. While there is no guarantee of bailouts in the future, there also is no question that money funds have acquired an enviable track record of safety.
Because money fund yields are so low, you can do better by shopping around for the highest-yielding bank money market accounts. As a bonus, you will get FDIC insurance.
Banks offering these high-yield accounts are "mostly institutions competing very aggressively to grow their deposit bases," said Greg McBride, an analyst for Bankrate.com, which tracks the rates.
The best yields on both types of accounts are listed on Page 4 of the Times Money & Business section each Sunday.
Q. I've heard that U.S. government bonds can be purchased directly without paying a commission. Can you tell me where?
A. You heard correctly. Treasury Direct makes it easy for investors to buy Treasury securities without going through a broker. The minimum purchase is $1,000. Although there is no fee to buy, there is a fee of $34 per security if you want the government to sell your bond before maturity. Your purchase choices are limited to those securities coming up for auction.
To sign up or learn more, call toll-free 1-800-722-2678 and ask for a Treasury Direct investor kit, or go to the Web site (www.treasurydirect.gov).
Q. When a person dies the stock in the estate has a new value. There is the date of death value or the alternate date to establish the value. What is the alternate valuation date? Do you have to use the specific date or can you use any time between the two dates?
A. The alternate valuation date is six months after the date of death. You can only use the alternate date if there is an estate tax liability, and you must use it for all assets in the estate. An in-between date can be used if you sold the stock during that time. In that case, the sale price
Lawyer Carl A. Schuh responded to last week's column, which discussed disinheriting children. He said leaving an adult child $1 or another token amount can create problems if the miffed child refuses to sign a receipt or otherwise cooperate with the person attempting to administer the estate. He says: "I recommend to clients that they specifically disinherit their children by saying "I am not unmindful of my son, (name), but it is my wish, desire and will that he not participate in the distribution of the assets of my estate by intestate succession, homestead or exempt property, antilapse or any other means unless he is specifically designated as a beneficiary of a nonprobate asset or assets.' "
Online Money Map
What was the real return on your money? That's often a tough question because we withdraw money from our accounts or make new contributions. CNNMoney has a Web site (cgi.money.cnn.com/tools/returnrate/returnrate.jsp) that will do the difficult work for you.
-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.
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