Breaking The Buck

Filed Under » , ,
Dictionary Says

Definition of 'Breaking The Buck'

When the net asset value (NAV) of a money market fund falls below $1. Breaking the buck can happen when the money market fund's investment income does not cover operating expenses or investment losses. This normally occurs when interest rates drop to very low levels, or the fund has used leverage to create capital risk in otherwise risk-free instruments.
Investopedia Says

Investopedia explains 'Breaking The Buck'

The NAV of a money market fund normally stays constant at $1 because investment products usually do not produce capital gains or losses. As such, the principal in a money market fund usually remains constant, making risk exposure non-existent compared to stocks, bonds and non-money market mutual funds.

The first case of a money market fund breaking the buck occurred in 1994, when Community Bankers U.S. Government Money Market Fund was liquidated at 94 cents because of large losses in derivatives.

Articles Of Interest

  1.

    Money Market Mutual Funds: A Better Savings Account

    An good alternative to the traditional savings account is the money market mutual fund. It's easy, safe and has better returns.

  2. Introduction To Money Market Mutual Funds

    Learn about the easiest way to benefit from money market securities.

  3. Do Money-Market Funds Pay?

    This investment provides security, but its returns may not be adequate for long-term investors.

  4. Breaking The Buck: Why Low Risk Is Not Risk-Free

    Money market funds have been assumed to be safe investments, and they are - but only to a point.

  5. The Money Market: A Look Back

    Learn how past inflationary periods can predict future real rates of return for cash investments.

  6. Why do some closed-end mutual funds trade above or below their net asset values?

    Intuition tells us that a mutual fund's net asset value (NAV) (the net value of all assets within the mutual fund's portfolio divided by the number of outstanding shares) should be identical ...

  7. What is a mutual fund's NAV?

    Net asset value (NAV) represents a fund's per share market value. This is the price at which investors buy ("bid price") fund shares from a fund company and sell them ("redemption price") to ...

  8. The Money Market

    If your investments in the stock market are keeping you from sleeping at night, it's time to learn about the safer alternatives in the money market.

  9. How To Cut Your Mutual Fund Fees By Up To 90%

    Most mutual funds don’t come close to beating the indexes they’re compared against. And yet they carry steep fees for active management. Find out how a little research and effort can cut your ...

  10. How Risk Free Is The Risk-Free Rate Of Return?

    This rate is rarely questioned - unless the economy falls into disarray.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...

  2. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.

  3. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.

  4. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.

  5. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...

  6. Bailment

    The contractual transfer of possession of assets or property for a specific objective.
Trading Center