Return of principal and return on principal!

Running Point and its chief investment officer, Michael Ashley Schulman, CFA, were quoted by U.S. News & World Report in an article — by Tony Dong, “7 Best Money Market Funds for 2023” — regarding using money markets to provide interest income and safety of principal within a brokerage account.

What to make of an inverted yield curve?

With the U.S. Treasury yield curve deeply inverted, safe short-term T-Bills and many money market funds yield more than much longer dated 5, 10, 20, and 30-year government Treasuries.

Note: Interest income earned on U.S. Government T-bills and Treasuries is not subject to state income taxes (even when they are inside a money market).

Bonds with longer maturities could do well and beat short-term securities on a total return basis if interest rates decline, but are likely to be hurt if interest rates rise or inflation exceeds expectations.

Quoted article excerpts are below:

A popular money market fund with over $223 billion in assets under management, or AUM, is VMFXX [Vanguard Federal Money Market Fund]. This fund is rather long-lived, debuting in 1981 and surviving multiple market crashes and recessions. Currently, VMFXX pays a seven-day SEC yield of 4.23% and costs an expense ratio of 0.11%.

“I like VMFXX for its low fees versus many other money market funds that not only have lower yields, but also higher expense ratios closer to 0.4%,” says Michael Ashley Schulman, partner and chief investment officer at Running Point Capital Advisors. The fund requires a minimum investment of $3,000.

Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Past performance is not indicative of future results. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-23-06