Boost Your Returns Via an
SMI-Recommended Money Fund
With interest rates going back up, the best deals will soon be found at money market funds, not your local bank 
. But if you're like me, sometimes you put off doing things you know will benefit you because you don't know where to begin. I understand your reluctance. Initially, since I had no previous experience with money funds, I was especially concerned about losing any portion of our family's savings. I wondered, "How safe are money market funds? What if an emergency came up and we needed the money right away? And how do I open the account?" To have these questions answered, I began doing the natural thing for someone with a Researcher temperament — researching!
I found that MMFs did offer the safety and liquidity I was looking for. Although not insured by the FDIC, they operate under strict government guidelines which are designed to make them very secure. And I could withdraw my money at any time without penalty. Once these concerns were taken away, I began my comparison shopping by calling the funds recommended in SMI's Best Rates tables . SMI's recommendations have outperformed the average money market fund for eight years running (see 2004 — Another Good Year for
SMI's Money Fund Recommendations ).
It was really encouraging to verify that they were offering more than the interest I had been earning! MMF yields have almost tripled since last summer and look to continue moving higher. Meanwhile, local banks are still offering 0.5%-1.0% on their money market accounts. And I know if rates keep rising, that performance gap will continue to widen. A few years ago when rates were higher, MMFs paid almost 3% more than bank money market accounts.
If you've been hesitant to move away from the friendly lobby of your local bank into a new area where you lack experience, these pointers should help make the transition an easy one.
1. Call the MMFs in which you're interested and ask a few questions: What's the minimum deposit required to open an account? What's their current 7 day compounded yield? Do they limit the number of checks you can write each month? Is there a minimum amount for which a check must be written (e.g., no checks less than $500)? After learning which offer the most attractive combination of yield and features (over time, Vanguard Prime is hard to beat), ask them to send their information package. Don't worry, this doesn't obligate you to do business with them.
2. The material you receive will include an application form and prospectus. The application form may look intimidating, but is actually quite simple and will take only a few minutes to complete. If you have any questions, you can call the fund's toll-free number and get all the help you need. Some of the questions require you to make choices (which can be changed at any time) among different convenience options. Most fund companies offer an option where you can automatically have your savings invested with them. Check the appropriate box if this is what you desire. To take advantage of check writing privileges (which I recommend), simply check this option and provide the appropriate authorized signature(s).
3. Fill in the amount that you will be depositing into your new money market mutual fund account and attach your check. Getting started in saving with MMFs is as easy as 1-2-3 and now you're on your way! 
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