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Author: imdajunkman Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: The PayPal Money MM Fund Date: 1/28/2006 1:53 PM
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If the information at www.bankrate.com can be trusted, then the following are currently (as of 01/26/06) the five, highest-yielding, taxable, money market funds. I have no reason to believe they have made mistakes, and I love the service that BankRate freely provides to small investors. They deserve a round of applause.

McMorgan Principal Prs Fund, MCPXX, 4.19% 7-day yld, 5000 min. deposit.

Premier Cash Res Fund, TPCXX, 4.15% 7-day yld, 1000 min. deposit.

Vanguard Prime MF, VMMXX, 4.07% 7-day yld, 3000 min. deposit.

TCW Galileo MMF, TCWXX, 4.06% 7-day yld, 2000 min. deposit.

Vanguard Federal, VMFXX, 4.03% 7-day yld, 3000 min. deposit.


That doesn't mean, however, that BankRate can be one's only source of information if one is a rate-chaser as everyone presumably is who comes to this discussion board. There is, in fact, a much unnoticed money market fund that BankRate fails to list which is beating all of them, namely Pal Pal's Money Market Fund with its 4.3% 7-day yield and $1 min. deposit.

“What? you say. “PayPal has a MM fund?”

Yes, they do, and the prospectus and semiannual and annual reports can be found at PayPal's website ifyou have an account with them, which is something I would ding them for. That information ought to be publicly available. But that's a business decision they've chosen to make. It's their fund, and they can run it as they choose.

Should one invest in their fund?

If you already have an account with them for the convenience of shopping at Ebay and the like, or for sending donations to the alternative, shoe-string-budget web sites you frequent, then you are already investing in PayPal's MM fund. You just weren't paying attention to how your money was being managed by PayPal. But their fund is a SEC-registered mutual fund, and it is structured exactly the same as any other MM fund. Therefore, it should have been ranked by BankRate at the top of their list. I'm guessing that the fund does not appear in BankRate's list because it isn't a fund they include in their survey population. Why? I don't know, nor am I curious enough to ask them.

There are several downsides to PayPal's MM fund. Cumulative, monthly withdrawals can be no more than $500, and their 4.3% rate, though superior to all other MM funds, isn't as good as some money MM accounts, which is a different animal. Let me repeat that.

Money Market Funds are not the same thing as MM Accounts.

Fuurthermore, neither MM funds, nor MM accounts, are currently beating the yields that can be obtained from T-Bills. (Disclaimer: you will have to be living in a state that exempts Treasuries from state taxes to obtain the advantage that Treasuries currently offer over alternative, short-term vehicles.)

All of those disclaimers and downsides not withstanding, I think PayPal's MM fund deserves more attention and consideration than it is currently receiving. It is quite possible that PayPal doesn't not want to attraction attention to itself for the purpose of avoiding the flood of money they might otherwise have to put to work. I just don't know.

Charlie
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