PayPal money market fund yield remains at 5.03% as of 8/11/2007

[Gentle reminder: I may suspend this weekly post in the near future, but I haven't decided for sure yet.]

Here are some recent money market mutual fund yields as of Saturday, August 11, 2007:

• iMoneyNet average taxable money market fund 7-day yield fell from 4.74% to 4.73%
• GMAC Bank Money Market account rate remains at 5.16% or APY of 5.30% (only $500 minimum)  -- Note: This is an FDIC-insured bank account
• Vanguard Prime Money Market Fund (VMMXX) 7-day yield fell from 5.12% to 5.11%
• Vanguard Federal Money Market Fund (VMFXX) 7-day yield remains at 5.08%
• AARP Money Market Fund 7-day yield fell from 5.08% to 5.07%
• TIAA-CREF Money Market (TIRXX) 7-day yield fell from 5.09% to 5.02%
• PayPal Money Market Fund 7-day yield remains at 5.03% (but actual yield for July was only 4.78%!)
• ShareBuilder money market fund (BDMXX) 7-day yield rose from 4.47% to 4.49%
• Fidelity Money Market Fund (SPRXX) 7-day yield rose from 5.02% to 5.04% ($25,000 minimum)
• Fidelity Cash Reserves money market fund (FDRXX) 7-day yield rose from 4.99% to 5.02%
• Fidelity Prime Reserves money market fund (FPRXX) 7-day yield rose from 4.47% to 4.48%
• Fidelity Municipal Money Market fund (FTEXX) 7-day yield fell from 3.25% to 3.22% or tax equivalent yield of 4.95% (down from 5.00%) for the 35% marginal tax bracket and 4.47% (down from 4.51%) for the 28% marginal tax bracket -- this may be the best rate that most of us can get for "core cash" in a checking-style account
• Fidelity Tax-Free Money Market fund (FMOXX) 7-day yield fell from 3.22% to 3.17% or tax equivalent yield of 4.88% (down from 4.94%) for the 35% marginal tax bracket and 4.40% (down from 4.46%) for the 28% marginal tax bracket
• 4-week (1-month) T-bill investment rate fell from 5.16% to 5.08%
• 13-week (3-month) T-bill investment rate fell from 4.97% to 4.91%
• 26-week (6-month) T-bill investment rate fell from 5.00% to 4.93%
• Treasury I Bond composite earnings rate (semiannual compounded annually) for new I Bonds is 3.74% (down from 4.52%), with a fixed rate of 1.30% (down from 1.40%) and a semiannual inflation rate of 1.21% (down from 1.55%) -- updated May 1, 2007, next semiannual update on November 1, 2007
• (I'm no longer following Schwab since they changed their web site and it is now too confusing to get rates that can be compared to a simple 7-day yield or APY)
• NetBank 6-month CD APY remains at 5.25%
• NetBank 1-year CD APY fell from 5.25% to 5.20%
• Bankrate.com highest 6-month CD APY fell from 5.51% to 5.43%

Note: APY yield is worth somewhat less than the same 7-day yield. See my discussion and table for Comparing 7-day yield and APY.

Update: I still have no idea what is going on with PayPal. I submitted a query to them, but they gave me a standard "see the prospectus" answer. I did read through the prospectus (again), but was unable to find any information that would explain the shortfall in the dividend for the month of July. I sent back a response requesting them to escalate the issue. Right now, I am seriously considering dumping them and parking the cash in Fidelity FDRXX which doesn't earn that much less. Stay tuned. I'll give them two weeks before I consider further action. Ultimately, I'll see what kind of yield I get for the month of August and that may be my decisionmaking guide.

Right now, Fidelity Cash Reserves (FDRXX) is my preferred parking place for cash. That is where most of my cash now resides right now. Actually I'm not that far away from being able to achieve the minimum for the Fidelity Money Market Fund (SPRXX) which usually has a slightly higher yield. It is a single click (well, maybe it is five or six clicks, but no more than a minute) away from my main Fidelity count which I use as my checking account. The convenience and fairly decent return are worth more than the hassle of using other, more offbeat or less accessible funds. The Vanguard and AARP funds look attractive, and the GMAC bank money market is tempting but I'm unsure about the association with GM/GMAC and whether the rate might be more of a teaser.

I am also thinking about whether I should consider putting my cash into a full ladder of rolling 13-week (3-month) T-bills. In such a plan I might invest 1/13th of my cash each week for 13 weeks and place standing rolling orders (each 1/13th slice would be reinvested every 13 weeks as it matures.) This would give me decent short-term liquidity, with 1/13th of my cash available as cash each week or more than a third available as cash every month. Such a rolling plan would smooth out much of the weekly and even monthly volatility. It would give me a little better return than all but a handful of money market mutual funds. Most attractive of all, I would get hit with absolutely zero fees. And, there would be absolutely zero uncertainty as to what assets my funds are investing in. On the other hand, it would be a pain to get it all set up and then a pain to have to cancel rolling orders if I take money out of the plan. Still, it is an option and it might work well for others even if I decide to simply keep my cash parked in FDRXX.

I am not an investment adviser, so my opinions and the data presented here should not be considered as advice for where to invest your money. You should examine this and other available data before deciding how to invest your money. And, seriously, past returns should not be construed as a guarantee or even an "indication" of future returns.

-- Jack Krupansky