Money market funds

Bostonerimus1

Pat38493 said:

The original questions here were about money market funds.

To my understanding, MMF and bond (funds) are not interchangable.  Bonds should not be seen as short term investments, but rather as diversifying factors in the portfolio that should provide, most of the time, reduced volatility, and in the times when they do become volatile it should hopefully not coincide with the same times that equities were volatile.  MMF would be more for short term (<2-3 years) most of the time.  MMF have come into focus in the last 2 years because of the rare situation that they were giving returns > inflation.

MMFs will contain very conservative and very short duration bonds. They are a useful short term tool where you can hold some cash that you plan to spend and get a bit of interest. Right now the yield curve is "inverted" so that short term debt is paying more than long term debt. That won't last and it's probably an error to deviate for a long term asset allocation and replace a well considered diverse bond allocation with MMFs. FYI when I owned a significant percentage of bond funds I always kept their average duration around 8 years to balance interest rate risk with yield.

If you are thinking about retirement income generation I would consider using your bond allocation to buy a lifetime annuity to secure a baseline income, leaving your equity allocation to hopefully grow and using a MMF to hold emergency cash and as a buffer/sweep account between your pension/brokerage account and your bank account.