Q&a

Q: I have heard the term "breaking the buck" in regard to money market funds. I know Reserve Primary Fund did this due to Lehman Brothers debt securities. Is this a problem for all money-market funds?

- K.H., via the Internet

A: "Breaking the buck," or having per-share value fall below a dollar, is rare, and money-market funds are considered quite safe. But the episode with Reserve Primary Fund shook the confidence of many investors, who moved large amounts of cash from money-market funds into bank money-market accounts insured by the Federal Deposit Insurance Corp. Yields are generally lower for those accounts.

The Treasury announced a temporary guaranty program in September for those money markets that pay a fee to participate in it. Coverage is provided to shareholders for amounts held in a participating fund as of Sept. 19.

The difference between money-market funds and bank money-market accounts?

"Money-market funds derive their returns from the short-term investments they invest in," said Greg McBride, financial analyst with Bankrate.com in North Palm Beach, Fla. "In contrast, money-market account yields are based on whatever a bank decides to pay."

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