1 00:00:28,709 --> 00:00:36,830 Suze: March 26, 2023. Welcome everybody, to the Women and Money podcast 2 00:00:36,860 --> 00:00:40,950 Suze: as well as everybody smart enough to listen. This is 3 00:00:40,959 --> 00:00:45,130 Suze: Suze O here and today is Suze School. 4 00:00:45,830 --> 00:00:49,880 Suze: It seems that the last Sunday podcast that I did 5 00:00:50,369 --> 00:00:54,680 Suze: Sheila Bair mentioned about whether money market accounts were insured 6 00:00:54,689 --> 00:00:58,159 Suze: or money market mutual funds were insured. It confused you 7 00:00:58,610 --> 00:01:01,220 Suze: and you wrote me and go, what did she say? 8 00:01:01,229 --> 00:01:04,949 Suze: I didn't quite understand it. So I want to explain 9 00:01:04,959 --> 00:01:10,120 Suze: to you now, the difference between a money market account 10 00:01:10,260 --> 00:01:13,680 Suze: and a money market mutual fund. 11 00:01:14,319 --> 00:01:18,970 Suze: First of all, a money market account is usually issued 12 00:01:18,980 --> 00:01:23,489 Suze: by a credit union and or a bank. 13 00:01:24,459 --> 00:01:28,809 Suze: It also usually pays you a higher interest rate 14 00:01:29,440 --> 00:01:34,529 Suze: than many savings accounts pay you. But in a sense, 15 00:01:34,540 --> 00:01:41,089 Suze: it is a savings account. It is insured by FDIC 16 00:01:41,099 --> 00:01:45,029 Suze: for a bank, NCUA for a credit union. So money 17 00:01:45,040 --> 00:01:49,949 Suze: Market accounts are absolutely insured. Got that, everybody 18 00:01:50,900 --> 00:01:56,260 Suze: A money market mutual fund is usually purchased via a 19 00:01:56,269 --> 00:02:04,029 Suze: brokerage firm and it is not covered by FDIC or NCUA. 20 00:02:05,720 --> 00:02:15,770 Suze: It is insured by SIPC. Security Investor Protection Corporation. 21 00:02:16,570 --> 00:02:20,320 Suze: Now, this is where a lot of you get confused. 22 00:02:20,490 --> 00:02:25,699 Suze: How does sic actually work? Well, you all know that 23 00:02:25,710 --> 00:02:30,009 Suze: it will cover up to $500,000 of securities 24 00:02:30,690 --> 00:02:37,220 Suze: and $250,000 in cash. And in your mind, that means 25 00:02:37,229 --> 00:02:42,320 Suze: that if you have more than $250,000 in a money-market 26 00:02:42,330 --> 00:02:43,080 Suze: fund 27 00:02:43,720 --> 00:02:48,519 Suze: that it will not be insured, wrong, wrong, wrong. So 28 00:02:48,529 --> 00:02:52,869 Suze: take out your little Suze notebook here because this is 29 00:02:52,880 --> 00:02:54,448 Suze: what you need to understand. 30 00:02:55,240 --> 00:02:57,779 Suze: A money market mutual fund 31 00:02:58,410 --> 00:03:03,279 Suze: is a pool of money that all of you invest 32 00:03:03,288 --> 00:03:04,220 Suze: money in 33 00:03:05,050 --> 00:03:09,580 Suze: and you buy shares in that money market fund. It's 34 00:03:09,589 --> 00:03:10,859 Suze: called a fund 35 00:03:11,479 --> 00:03:16,309 Suze: not a Money Market account. An account is a savings account, 36 00:03:16,320 --> 00:03:21,869 Suze: a checking account. A fund applies to when you have 37 00:03:21,880 --> 00:03:27,198 Suze: an investment. A fund is when different people pool their 38 00:03:27,210 --> 00:03:32,059 Suze: money into this one fund and you own shares of 39 00:03:32,070 --> 00:03:37,470 Suze: that fund. Every money market fund issues shares. 40 00:03:37,830 --> 00:03:42,050 Suze: You invest $10,000 in a money market fund. 41 00:03:42,929 --> 00:03:49,300 Suze: You own 10,000 shares of that fund at a dollar 42 00:03:49,309 --> 00:03:53,419 Suze: a share. Money market funds, hopefully 43 00:03:54,229 --> 00:03:57,669 Suze: their share price or their net asset value, which is 44 00:03:57,679 --> 00:04:02,160 Suze: what it's truthfully called. Always is supposed to hold a 45 00:04:02,169 --> 00:04:09,369 Suze: $1 value. It doesn't go up and it doesn't go down, hopefully. 46 00:04:09,690 --> 00:04:17,558 Suze: Except in 2008 with TD Ameritrade, it did go down 47 00:04:18,049 --> 00:04:20,160 Suze: when everything was happening, 48 00:04:20,940 --> 00:04:27,329 Suze: TD Ameritrade's money market fund broke the buck. That is 49 00:04:27,339 --> 00:04:30,269 Suze: what it's called. That's what you heard me talk about 50 00:04:30,279 --> 00:04:35,269 Suze: with Sheila last Sunday. Breaking the buck simply means it 51 00:04:35,279 --> 00:04:42,200 Suze: goes under a dollar a share. Now, listen closely. What 52 00:04:42,209 --> 00:04:46,390 Suze: that means is this, let's just say 53 00:04:46,988 --> 00:04:52,618 Suze: that you decided you wanted to put $500,000 in a 54 00:04:52,630 --> 00:04:55,500 Suze: money market fund because they were paying you a great 55 00:04:55,510 --> 00:04:58,729 Suze: interest rate and you could get that money anytime you wanted. 56 00:04:59,149 --> 00:05:03,720 Suze: So you deposit $500,000 in this fund and that's all 57 00:05:03,730 --> 00:05:05,320 Suze: you have at this brokerage firm. 58 00:05:06,079 --> 00:05:13,739 Suze: That means that you own 500,000 shares at a dollar 59 00:05:13,750 --> 00:05:16,868 Suze: a share of the money market fund. 60 00:05:17,769 --> 00:05:19,619 Suze: Now, let's say 61 00:05:20,290 --> 00:05:26,238 Suze: that the brokerage firm goes belly up. Now you're freaked because, 62 00:05:26,250 --> 00:05:33,920 Suze: you know, SIPC only covers $500,000 of securities but only $250,000 63 00:05:33,928 --> 00:05:34,738 Suze: of cash. 64 00:05:35,690 --> 00:05:40,079 Suze: And now you are afraid that you have lost 250,000 65 00:05:40,089 --> 00:05:44,459 Suze: in your money market fund. No, you have not. 66 00:05:45,369 --> 00:05:53,599 Suze: Your money market fund is covered up to $500,000 of SIPC. Why? 67 00:05:53,609 --> 00:05:58,510 Suze: It's because it's an investment. It is not cash notice 68 00:05:58,519 --> 00:06:07,299 Suze: when they talk about SIPC, they say $250,000 in cash, $500,000 69 00:06:07,309 --> 00:06:09,100 Suze: in investments. 70 00:06:09,910 --> 00:06:17,760 Suze: So you would be covered for 500,000 shares of this 71 00:06:17,769 --> 00:06:18,480 Suze: fund 72 00:06:19,070 --> 00:06:24,519 Suze: and it would be returned to you. However, let's just 73 00:06:24,529 --> 00:06:30,480 Suze: say that the firm also at that time, broke the 74 00:06:30,488 --> 00:06:37,769 Suze: buck and now these 500,000 shares are only worth $0.98 75 00:06:38,010 --> 00:06:38,839 Suze: a share. 76 00:06:39,980 --> 00:06:44,000 Suze: You would get your 500,000 shares back, 77 00:06:44,660 --> 00:06:50,868 Suze: but those shares would only be worth $490,000 at that time. 78 00:06:51,920 --> 00:06:56,450 Suze: That is why Sheila said last week that you're not 79 00:06:56,459 --> 00:06:59,269 Suze: always guaranteed to get your money back. 80 00:07:00,010 --> 00:07:04,480 Suze: You're guaranteed to get your shares back, but not necessarily 81 00:07:04,488 --> 00:07:07,558 Suze: the cash that you put in. Now, chances of it 82 00:07:07,570 --> 00:07:11,279 Suze: breaking the buck is pretty nil, but you just need 83 00:07:11,290 --> 00:07:18,059 Suze: to understand how it works. What is $250,000 in cash? 84 00:07:18,910 --> 00:07:23,339 Suze: Cash is cash. It's somewhere where it's not earning really 85 00:07:23,350 --> 00:07:28,609 Suze: an interest rate. It's just there. The other day, Colo 86 00:07:28,619 --> 00:07:31,920 Suze: had a Treasury bill that I had purchased for him 87 00:07:31,929 --> 00:07:38,589 Suze: come due and he now has $20,000 in cash. When 88 00:07:38,600 --> 00:07:45,040 Suze: you look online at his statement, it says $20,000 in cash. 89 00:07:46,149 --> 00:07:51,480 Suze: So cash is cash. A money market fund is shares. 90 00:07:51,510 --> 00:07:55,250 Suze: And now you know the difference between a money market 91 00:07:55,260 --> 00:08:00,640 Suze: account and a money market fund. All right, that brings 92 00:08:00,649 --> 00:08:04,420 Suze: us to the end of this week's Suze School. Just 93 00:08:04,429 --> 00:08:08,880 Suze: want to remind all of you on March 30th. 94 00:08:09,250 --> 00:08:14,059 Suze: That's this coming Thursday. I am giving a webinar called 95 00:08:14,079 --> 00:08:20,000 Suze: Prepare for the Financial Climate Change to absolutely register for 96 00:08:20,010 --> 00:08:24,880 Suze: it for free, go to Suze Orman dot com slash webinar. 97 00:08:24,980 --> 00:08:28,720 Suze: It will be at 3 pm pacific time, 6 pm 98 00:08:28,730 --> 00:08:29,958 Suze: east coast time. 99 00:08:30,066 --> 00:08:33,426 Suze: So many people are registering for it. I can't even 100 00:08:33,434 --> 00:08:39,314 Suze: believe it. We are expecting approximately 50,000 people. So hopefully 101 00:08:39,325 --> 00:08:45,096 Suze: you will be one of them. So until Thursday when 102 00:08:45,106 --> 00:08:50,574 Suze: I'm doing the webinar and another Ask KT and Suze Anything, 103 00:08:50,841 --> 00:08:53,382 Suze: there's only one thing that I want you to say 104 00:08:53,392 --> 00:08:59,331 Suze: every single day. And it is as follows: today, wherever 105 00:08:59,341 --> 00:09:04,242 Suze: I go, I will create a more joyful, peaceful and 106 00:09:04,252 --> 00:09:07,492 Suze: loving world. And if you do so what will all 107 00:09:07,502 --> 00:09:11,622 Suze: of you be? You will be unstoppable.