In the current low-yield environment, it’s not uncommon to see low interest rates on Money Market Accounts. We view these “safe” havens as a tactical or temporary resting place, and feel you should not be allocating investment funds to this asset class on a long term basis. What you may not realize is that even if interest rates go up, it still is not a good long term place to invest.
The following chart is a great example of why you need to evaluate safety after factoring in the effects of inflation:
1. Sources: Money Market Accounts’ Average Yield: BanxQuote®. Copyright ©2013 BanxCorp. All rights reserved. BanxQuote® is a registered trademark and servicemark of BanxCorp. Inflation: Bureau of Labor Statistics. Inflation is represented by year-over-year changes of the Consumer Price Index (CPI) plotted on a monthly basis. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE PERFORMANCE.