when money market funds have comparable yields to CD maturity rates, is it obvious money market funds trump
(in light of added questions from others, my question is slightly edited)
New to investment and only recently did I notice that in the US some money market funds generate 1.5-2.3% yields, which are comparable to most short-term (<2 yr) CD rates.
Based on the yields and comparable taxes,
(a) is it correct that money market funds are a better investment now ? Considering that there is a penalty for an early withdrawal of funds in the CD but money market funds are more fluid and can be withdrawn when yields drop (with no penalty).
(b) what specific risks should I look for in the money market funds ?
(1)1 Comments
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In the US, the best one year CD is 2.75% which is a decent amount better than the best MM rates. MM funds are not a better investment now unless one year rates jump well past 2.75% in the next year and that's not likely to happen.
There are small differences b/t the two. For example, possible delayed taxation with a CD. But otherwise, there's no tax advantage to either product.
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