Money market mutual funds - how safe?

[CantGetFooledAgain]

I hope someone here can answer this question for me. Due to a lack of confidence in the stock market under the current regime, I wanted to put most of my money somewhere where it would be safe and "guaranteed" not to lose value. I have a brokerage account linked to my checking account, and most of the money in the brokerage account is kept in a "sweep" account that is invested in money market mutual funds. These are currently earning about 5%, so I feel quite relieved at times like this (and somewhat foolish when the market is going up).

Here's my question: this account is not FDIC insured as it is managed by the brokerage arm of the bank. They do offer FDIC insured sweep options with lower yields. How safe is this investment under the "worst case" scenario? Can the shares go below $1? Can they become worthless? What are the odds of something happening to this investment?

Should I move money into FDIC insured accounts, or am I just being alarmist?

Thanks.

[OrangeCountyDemocrat]

1. Here's Link To Article In Today's L.A. Times

http://www.latimes.com/business/la-fi-money16aug16,1,1179583.story?coll=la-headlines-business&ctrack=3&cset=true

[CantGetFooledAgain]

4. Very interesting article, thanks for the link n/t

[BOSSHOG]

2. How old are you?

We've been in mutual funds for about 25 years and have rode out the good and the bad years and overall have come way out ahead. I'm 53 and am starting to look at retirement monies and a more secure investment portfolio but ya got to sometimes check your gut. If you don't like whats going on today, and its hard to like what's going on today, you may want to move your money OR start a parallel savings device in commercial bank CD's (they should be getting about 4+% now.) You can use the money going into the brokerage account to start a new CD at your bank every month (maybe 12 month maturity) and then add to each one at each maturity. Peace of mind, but in two years you may be kicking yourself or you may be quite happy with that move.

One of my favorite lines from a retirement financial planning class; I can devise the perfect retirement plan for you and I just have to know one thing, when are you doing to die?

Good Luck.

[CantGetFooledAgain]

7. Thanks for the response

I'm in my mid-forties right now. I like your suggestion about CDs but the principle I was operating on was that these money market funds were AS SAFE as CDs, with similar returns. Now I'm not sure whether even safe is safe enough.

I'm inclined to wait out the Bush years with as conservative a portfolio as I can muster. I think that a financial catastrophe on top of all of the other catastrophes that we have seen may be a pretty good bet.

[BOSSHOG]

9. You have to plan incrimentally

What to do at 45, 50, 55, 60 and beyond. If your assumption is that your mutual funds are as safe as CD's then FDIC has to be taken into consideration. Awesome tiebreaker.

I wouldn't get out of the market entirely, if we are lucky bush will leave us with a buying frenzy.

And don't forget a Roth IRA.

[pitohui]

3. they're perfectly safe however

if you are really concerned you can move $100K into an fdic insured account, more than $100K is not insured anyway unless this rule has been changed since i started investing (always possible)

[OrangeCountyDemocrat]

5. They're Perfectly Safe NOW

But I'm a Pessimist. I think things could really snowball, and then there won't be anyplace that's "truly" safe.

[ThomWV]

6. Why do you think this is a bad time to be buying stocks?

If I was sitting on a bunch of cash right now I'd be buying everything in sight.

[CantGetFooledAgain]

8. That's a good point, and I have considered it

It certainly is a good time for bargain shopping, but I still don't like the risk that what I buy may continue to slide, vs. the security of having something that is truly safe and just riding it out.