- Money Market Funds are funds that generally invest in short-term government securities
This is incorrect. They invest in short-term securities, which may result in them using commercial paper as well (Banks make money by loaning at high long term rates and borrowing at short term commercial rates). This commercial paper is why the money markets froze in the 2008 crisis. (and why the government stepped in to provide guarantees to get the market functioning again, see:
http://www.finra.org/investors/alerts/treasurys-guarantee-program-money-market-mutual-funds-what-you-should-know ). If it was only government paper, it would have been fine.
- Treasury bills are available for purchase directly from the US government through Treasury Direct or through your broker. They can be bought and sold
at any time (redacted for now - looking into the details) through your broker. They are offered a in 4, 13, 26, and 52 week bills with slightly increasing yields, and yields are currently starting at a little over 2.1% and going to about 2.6%
Since your post refers to 0-2 years, you may also want to refer to 2 year Treasury Notes (Bills: <=52 weeks, Note: <= 10 years, Bond: >10 years).
Bills/Notes/Bonds are also available on a deep secondary market. This allows them to effectively be bought and sold at any time through a broker.
If you want to buy on the primary market, they are auctioned in various lengths at various times (see PDF posted by One), but various issues mature weekly, so you can buy after-market bills that mature every Thursday any time the market is open.
To give folks a place to find current rates, you should point to the daily treasury yield curve:
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield- Certificates of Deposit (CD's) are available through many outlets. Returns are up to ~3%.
Pros:
- Highest Returns
- FDIC insured
Technically, they are not all FDIC insured. It has to be issued by an FDIC insured bank.
Cons:
- Can return 0% if withdrawn early (varies by company and type of CD)
Technically, you can LOSE money if you try to get out early. You MUST read the CD literature and understand how you are acquiring the CD. A CD may require it be sold on the open market if you want out early rather than just an interest penalty - so if interest rates rose significantly, you can lose principal.
For people considering short term savings they should really only consider buying new issue bills at auction and holding to maturity. If you have to sell before maturity then you probably should not have bought in the first place.
This is a silly restriction. If you are buying any large quantity ($10K+), then there is little inefficiency in buying on the secondary market to hold to maturity. In fact, the rates can be better at times than what results are at auction (and is worse at times as well). The advantage of the secondary market is that you can pick the exact week that the bonds will mature, and start earning interest immediately, rather than being stuck at the fixed increments of what is available at auction.
Not really. You will sell your bill and the interest you will have earned will have been less than the rate purchased at. For simplicity, consider a 26 week bill earning 3%, and the interest just happens to be $100. You want to sell at 13 weeks. So if you sold for $50 more than purchase price, you earned 3% interest, right? And the guy that buys it gets the other $50 when it matures. Well, instead, you're going to sell for maybe $40 more than purchase price, and the buyer gets the other $60 when it matures. So you earned less than 3% and buyer earned more. But you still didn't lose money.
This is also mathematically wrong. One counter-example (of many) occurred October 22, 2015.
It is *highly unlikely* that you will lose money at current interest rates, but back when bills were yielding smaller values, that was certainly NOT a guarantee. Some of them actually had negative interest rates for a while:
https://www.reuters.com/article/markets-money-idUSL1E8NH6JJ20121217 ... the problem is if you bought at 0.2% interest, and half way through you want to sell, but short term rates jump to 0.4%, then you are pretty much are guaranteed to lose money, since there will be SOME transaction fee charged to get out of the bond, and all the interest will be expected by the buyer.
Edited to add:
There is a reason this isn't easy: The world is not simple. There are other quirks and clever marketing that tries to deceive people into thinking they are getting one of the things in the original list. I'm not implying that these are things that belong in the primary list, but the risk is that people need to know these things exist and are NOT the items above.
There are:
See also:
http://www.finra.org/investors/certificates-deposit-cdsThere are also Ultra short term Bond Funds, like SHV, which are in a similar category of short term investment, but I've generally found these fail to yield anywhere near as much as other items already on the list.