Fidelity shuts three money market funds to most new investors (way lower yields coming anyway) [View all]

[progree]

https://finance.yahoo.com/news/fidelity-shuts-three-money-market-205320236.html

Fidelity Investments, one of the world's largest asset managers, on Tuesday closed three money market funds to new investors to protect the return of existing shareholders after the Federal Reserve this month cut short-term interest rates to near zero.

Restricting the money flow into the three funds will help reduce the number of new Treasury securities paying lower yields that Fidelity will need to purchase and thereby halt the dilution of existing shareholder returns.

"Newer issues generally have lower yields than the funds' current holdings, and as such they would affect the funds' ability to continue to deliver positive net yields to shareholders," Boston-based Fidelity said in a statement.

This isn't posted to discuss Fidelity, rather that no matter what money market funds you have with whomever, expect to see their yields drop way low (like back to the 0.10% range we saw a few years ago, if we're lucky.

The last sentence of the excerpt scares me "affect the fund's ability to continue to deliver positive net yields" -- uggh, meaning we may have negative yields, net after expenses.

I was thinking of putting all the equity holdings I sold on the 30th into money market funds for awhile, but decided to go with an intermediate bond fund. I will be posting about my decision in an OP here soon. I still have 46% of my investable assets in equities (and 54% in fixed income mostly bond funds). I was at 64% equities for most of the year before March 30. (I was at 90% or more before April 2019).

As some may know, I've been preaching buy-and-hold equities buy-and-hold equities endlessly here, and making an enormous hoo-hah about how I didn't change my equity holding percentage at all at any point during the 2007-2009 crash, so this is an extremely extraordinary decision on my part. Anyway, I feel a lot better not having a majority portion of my investable assets subject to the coming market bloodbath.

I may work on further reducing the 46% equity proportion to 40% or so, but will have to incur capital gains taxes to do that. I could get into much higher Medicare premiums if I'm not careful (they are based on AGI, and capital gains add to AGI as do Roth conversions -- a good time for those is in a market downturn -- and IRA RMD distributions).

Edited to add: The transactions I made on March 30 did not generate any capital gains taxes because they were in an IRA account -- very nice to have a large IRA account to do rebalancing or repositioning without having to worry about taxes.