Money market funds don't guarantee a $1 a share

This is perhaps a good time to remind everyone that when you buy a money market fund, you buy a share and earn returns.

The share is priced at $1 a share and that never seems to change. That's an industry convention however, not a law. Even if you have money parked in an ultra-low interest US Treasuries money market fund, there's no law that the share price has to stay at $1. In theory, you can lose money ...

Worse than ever - Paul Krugman - Op-Ed Columnist - New York Times Blog

... Here’s the one-month T-bill rate, from the WSJ; when it goes way down, that’s showing a flight to safety. As of this morning, it’s about 0.2% — a panic level. This probably reflects the emergence of trouble in money market funds, which strikes me as very scary — yet another type of postmodern bank run...

If a money market fund invests in US treasuries, and the fund is earning an insignificant interest rate, then the fund's expenses will mean that, if the share price doesn't fall, the fund is operating at a loss.

If you're losing 0.3% a month on a hundred billion dollars those losses can hurt.

At least one small company money market fund lost value recently. I think we're a good way from Vanguard or Fidelity money market funds dropping share prices below $1/share, that's pretty far down on my personal worry list.

It would be wrong, however, to say that a money market fund is as safe against loss as an FDIC bank account.