Yields are back

Money Market Mutual Funds are yielding about 5% for the first time in many years (www.cranedata.us). Not too long ago Money Markets were yielding only around 1% or less and forced many investors to look elsewhere to stash their cash. While the higher yield is good, remember that Money Market Funds are not really intended to be vehicles to maximize return. Money Market Funds and their equivalents (very short-term bonds, CD's, and savings accounts) are really designed for money with shorter-term goals. Even while a safe investment offering 5% sounds good, it is hardly enough to out pace inflation and help meet your long-term goals. In the investment world, its all about risk versus reward. Money Markets offer liquidity and stability. With little risk, you tend to have little potential for return. These vehicles are really best suited for your short term emergency reserves (ideally at least 3-6 months of living expenses) and other short-term expenses, while your other assets should be invested elsewhere to maximize your long-term returns. Vanguard, Fidelity, Dreyfus, and others all offer competitive yields. Just remember, that cost counts and that is why Vanguard typically offers the highest yield of the bunch.