Any investment account at a brokerage usually has an associated cash account in which proceeds from sales and dividends are deposited, usually in the form of a money market fund. According to this free Wall Street Journal article, investment banks are purposely moving investors’ cash funds into accounts that earn less than typical money market funds. This, of course, allows the banks to make more money off your account.
The good news is that there are options. Many brokerages allow you to request better accounts for holding cash. For example, the default option at E*Trade is to keep your cash in a deposit account earning 0.40% interest. They do, however, offer tax-exempt money market funds yielding up to 1.57%. That rate may not compete with the likes of ING Direct and Emigrant Direct after taxes (I haven’t done any calculations), but it is certainly a more favorable option than the default sweep account offered.
Email this article
Print this article
Share this article: Twitter | Tip'd | Facebook | Delicious | Reddit | Digg
About the Author
