Money Market Funds: Broken Forever?

From Barron's online: 


What's the difference between a piggy bank and a money-market fund?

Not much. Neither is insured, and the returns are basically the same: nothing. The average money fund these days pays just two basis points, or 0.02%. A third of them pay nothing at all....

IF SAFETY IS YOUR CONCERN, you're better off in an account insured by the Federal Deposit Insurance Corp. Checking, savings and money-market deposit accounts -- unlike money funds -- are insured by the FDIC up to $250,000 per account holder per institution. ...

And today's low-rate environment is perversely beneficial for some bank accounts -- non-interest-bearing accounts have unlimited protection through 2012, and there's talk of extending that guarantee. That means giving up a basis point or two in return, but that's a small price to pay for insurance....

In sum, money-market funds, which were created in the 1970s to give investors a better shake than non-interest-bearing bank accounts, look badly broken.

And they are likely to stay that way as long as the no-yield environment persists. But that won't last forever. Until then, the riskiest funds are those with assets of $1 billion or less that are not part of a larger institution. If your cash is in one of them, consider moving it now, while you still can....
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Link: http://online.barrons.com/article/barrons_cover.html