Review of Money Market Funds
Today we have 5 funds of this type.
FXMM, FXTB, VTB, RCMM, SBMM Funds assume slightly different assets within themselves, but they have the same essence. Funds invest in very short instruments with a low level of risk and high liquidity. The idea of using these funds is a short-term placement of the cache.
But let's look inside the funds and you will understand why I call the funds useless and even wrecking at the moment.
FFXTB - fund for super short US bonds TBILLS. These are bonds for 1-3 months, an instrument with an AAA rating - the highest credit rating.
Sounds great! What you need to save $1000 before drawdown ...BUT!
What is the current rate in the USA? Near - zero… What is the yield on such trezharis? 0.06%!
So, you buy a fund, the yield of the underlying asset in which is 0.06% in dollars.
But that's not all! Your money is eaten up by the commission every day. Yes, it is a small 0.2%. But the yield is 0.06, and the commission is 0.2. In addition, you pay a commission to the broker for the purchase and sale of the fund.
You are already in the red!
And if you buy this fund for rubles, and the dollar will grow, then you will get a ruble yield despite the fact that you have a loss in dollars, and you will pay more TAX.
Conclusion! It was easier to keep money just in dollars!
It would be more profitable for you.
I will repeat the thought once again to consolidate
AT THE MOMENT, THE FUND HAS A NEGATIVE YIELD, AND ALL PROFITS ARE ONLY DUE TO THE EXCHANGE RATE DIFFERENCE. SIMILARLY, YOU CAN JUST HOLD DOLLARS AND MAKE A PROFIT FROM THE EXCHANGE RATE DIFFERENCE.
When to buy a fund?
When rates rise in the US. A couple of years ago, the yield in such a fund could be at the level of 1.5-2% in dollars and this is higher than any bank deposit in foreign currency.
Cryptocurrencies today are a roller coaster in price +100% -50% + 170% -60%... a person who has decided to hold bitcoin should be ready for about such jumps.
I am often asked if it is possible to become a passive investor in cryptocurrency on the principle of "buy and hold". Hypothetically, it is possible, in practice, as time shows, it is not.
Why does index passive investing work?
Indexes rebalance, and the top of the index is always the best companies at the moment, which drag the entire index with them.
Economic growth in the world and globalization - because of this, companies are also growing.
Why has Bitcoin started to grow?
If you do not know and do not understand exactly what bitcoin is, write in the comments and I will make a separate post about it with a detailed story about what kind of asset it is (and whether it can be allocated to a separate asset class).
In 2020, interest in bitcoin began to grow. This is due to the economic situation and how events unfolded on the stock market. In short, taking into account the pandemic, the risk of dollar devaluation (due to all the measures that were in the US) and increasing inflation, people decided that bitcoin (cryptocurrencies) would be an alternative. After all, according to its characteristics, bitcoin is something adjacent between gold and currency.
Logically, the price of bitcoin should rise due to the fact that their number is limited, and bitcoin mining is becoming more difficult and more expensive. But we see a speculative crackdown, which was further supported by the purchase of bitcoin by companies: MSTR, TSLA, SQ, etc.
What's the point of the story - we can't say that bitcoin (or another cryptocurrency) can take a place in the investor's long-term portfolio today.
Volatility, lack of regulation, restrictions by central banks, etc... make this asset extremely speculative.