Money-market mutual funds are a safe place to park cash and keep it accessible, while also earning a small return. Their share prices are supposed to remain stable at $1, unlike other mutual funds whose share prices vary depending on shifts in the stock and bond markets. Yet one large money fund “broke the buck” when its share price fell to 97 cents during the worst of the financial crisis in September 2008. Since then, federal regulators have adopted rules to strengthen the ability of money funds to protect investors from losses when markets are under stress. Here’s a look at key rules that were phased in last year: » Higher credit quality: Money funds are barred from investing more than 3 percent of their assets in securities that are other than the highest grade. Previously, funds were allowed as much as 5 percent in “second-tier” securities carrying slightly higher risks and returns.
» Portfolio diversity: Funds can hold no more than 0.5 percent of their portfolios in second-tier debt from a single issuer. The goal is to prevent one soured investment from tripping up an entire portfolio.
