• Skip to primary navigation
  • Skip to main content
Mullooly Asset Management, Inc

Mullooly Asset Management

Fiduciary Fee-Only Financial Planner | Investment Advisor in Wall, NJ

  • Services
    • Wealth Management
    • Financial Planning
    • Retirement Planning
    • Investment
    • Estate Planning
  • Our Fees
  • About
  • 732-223-9000
  • Schedule A Meeting

Services

  • Wealth Management
  • Financial Planning
  • Retirement Planning
  • Investment
  • Estate Planning

Quick Links

  • About
  • Our Fees
  • Videos
  • Podcasts
  • Blog

Support

  • Contact
  • Client Login
  • Pay Bill Online
  • Form CRS
  • Our Process
Follow us on Facebook
Follow us on Linkedin
Follow us on Twitter
Watch On Youtube

Let’s talk
Ep207Cover1

The Price for Safety

August 24, 2020 by Timothy Mullooly

In Ep. 207 of the Mullooly Asset Show, Tom talks about the new price for safety.  With interest rates are practically zero, it’s becoming increasingly difficult to find any traditionally “safe” investments that yield much of anything.

Show Notes

‘Money Funds Waive Charges to Keep Yields From Falling Below Zero’ – The Wall Street Journal

The Price For Safety – Transcript

Tom Mullooly: In episode 207, we talk about the price investors are going to pay to keep their money safe. You’re going to want to tune in. Welcome to the Mullooly Asset Show. I’m your host, Tom Mullooly, and this is episode number 207. Thanks for tuning in.

So what is the price for safety? The Federal Reserve has plunged short term interest rates to zero in an effort to keep the economy afloat here in 2020. So if you’re concerned about the markets, maybe the election in November has you a little spooked, what can you expect when you put money into cash, into a money market, into a stable value account? Well, not much. And honestly, close to zero. A lot of folks have heard me use this phrase, you’re going to need a microscope to see numbers that small. I was a little surprised when a client suggested that they move their retirement account into the stable value option that he has in his plan.

We get that a lot and it’s a mistake. But I was more surprised when he said, “At least in stable value, I’m going to earn 4% there.” Whoa, stable value in the past 12 months has earned a little over 2%, but stable is in all short term bond funds, some treasury, some corporate, the average duration is a little more than two years. And if you look at similar short term bond funds, current yield are well, well, well below 2% now and yields are continuing to fall. See, as short term bonds that these funds hold as they come due, the fund has to then reinvest that money at whatever the current rates are and they’re pretty low. So it’s really deceptive when you go online to try and compare the returns on short term bond funds. That only tells you what happened in the past 12 months. You’re going to have a piece of that as your income and you’re going to have some price appreciation as well.

So in the past 12 months, now, this is being recorded in August of 2020. So in the past 12 months, short term bond funds have paid out 2%, maybe 2% more or 2% plus, and some of these funds have made money because the bonds that they owned actually went up in price. So it’s very, very tricky when you’re comparing returns for bond funds and it’s also very difficult to find yield, current yields. You also have to understand that when they cite a current yield, that was as of yesterday, it doesn’t tell you what’s going to happen in the next 12 months.

In fact, there was a Wall Street Journal article just today, we’ll link to it in the show notes, that points out that some banks are now not taking the fees that they would normally earn on money market funds because the rates would be negative. That’s how low rates have come in just the last couple of months with this action by the Federal Reserve.

So if you want to be safe, you want to be ultra safe, just understand it comes with a cost. You’re not going to earn much if anything, on your money. Just something to think about before you start making wholesale changes to your accounts. As always, speak with your investment advisor, your financial planner when it comes to making changes to your portfolio. We’re happy to help you out.

That’s going to wrap up episode 207. Thanks for tuning in.

If you would like a PDF version of this transcript, please follow this link for a download!

Never miss a post...and we deliver!

newsletter mailman

Get our updates delivered right to your inbox. Sign up today!

Success! Now go and check your email to confirm your subscription.

There was an error submitting your subscription. Please try again.

We won't send you spam. Unsubscribe at any time. Powered by ConvertKit

Filed Under: Videos

1971 State Route 34, Suite 102
Wall Township, NJ 07719

  • 732-223-9000
732-223-9600
  • support@mullooly.net
  • Services
  • About
  • Our Fees
  • Contact
  • Form CRS
  • Videos
  • Podcasts
  • Blog
  • Client Login
  • Pay Bill Online
  • Our Process

The information on this website and blog do not involve the rendering of personalized investment advice. A professional advisor should be consulted before implementing any of the options presented. None of the content contained in this website should be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

© 2022 Mullooly Asset Management Inc. All Rights Reserved.

  • Privacy
  • Disclosures and Legal Disclaimers
  • Privacy
  • Disclosures and Legal Disclaimers

© 2022 Mullooly Asset Management Inc. All Rights Reserved.