Question: Will Money Market Funds Break The Buck?

Which money market fund broke the buck?

On Tuesday, September 16, 2008, the $62.6 billion Reserve Primary Fund “broke the buck.” That meant the fund managers couldn’t maintain its share price at the $1 value.

1 Money market funds used that value as a benchmark.

Investors were panicking after Monday’s bankruptcy of Lehman Brothers..

Can you lose money in a money market fund?

Higher-risk money market funds may invest in commercial paper, which is corporate debt or foreign currency CDs. These holdings can lose value in volatile market conditions or if interest rates drop, but they can produce more income, too. Money market funds are not insured against loss by the FDIC.

How do money market funds maintain $1 NAV?

Money market funds seek a stable net asset value, or NAV per share (which is generally $1.00 in the United States); they aim to never lose money. The $1.00 is maintained through the declaration of dividends to shareholders, typically daily, at an amount equal to the fund’s net income.

How fast can you get your money out of a money market fund?

Liquidity. Investments in money market funds are typically liquid, meaning you can usually get your money out within a few business days. It generally takes one trading day for a mutual fund sale to settle. After that, you may have to transfer the funds to an account that allows spending.