Another potential issue could occur if the fed funds rate drops below the expense ratio of the fund, which may produce a loss to the fund's investors.
To reduce the risks and better protect themselves, investors should consider the following: Confusion in the Money Market Money market funds are sometimes called "money funds" or "money market mutual funds," but should not be confused with the similar sounding money market deposit accounts offered by banks in the U. The major difference is that money market funds are assets held by a brokerage, or possibly a bank, whereas money market deposit accounts are liabilities for a bank, which can invest the money at its discretion - and potentially in (riskier) investments other than money market securities.
This created the potential for a bank run in money markets as there was fear that more funds would break the buck.
In the history of the money market, dating back to 1971, there was only one fund that broke the buck until the 2008 financial crisis.
In 1994, a small money market fund that invested in adjustable-rate securities got caught when interest rates increased and paid out only 96 cents for every dollar invested.
This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. If you received an option to buy or sell stock or other property as payment for your services, see Pub.
It explains what investment income is taxable and what investment expenses are deductible.