Investment Dollars Idling in Accounts

For many investors, this year has been about not investing.

More than $2.2 trillion in cash sits in money market mutual funds. That is approaching the $2.7-trillion value of all stock mutual funds, according to the Investment Company Institute, the funds’ chief trade group.

More striking has been the buildup of cash in basic bank savings accounts. Americans have pumped a net $360 billion into savings accounts this year, and a total of $900 billion has flowed in since March 2000, when the stock market peaked, according to the Federal Reserve Bank of St. Louis.

At $2.67 trillion now, the savings account total dwarfs the $1.06-trillion value of all bond mutual funds.

There also is far more in savings accounts than in small (under-$100,000) bank certificates of deposit. Small CDs hold about $900 billion, Federal Reserve data show. Savers have been reluctant to lock up their money in CDs at current rates, preferring instead to have ready access to their cash.

With the Fed keeping short-term interest rates at 40-year lows, investors are earning next to nothing on cash accounts, of course. The seven-day average annualized simple yield on taxable money market funds was 1.25% as of last week, according to fund-tracker IMoneyNet Inc. That is down from 1.6% at the start of the year.

Many money funds and many bank savings accounts are yielding less than 1%. After accounting for taxes owed on that interest, and the rate of inflation, the real return on cash accounts is zero or slightly negative. And most economists believe there is little prospect of short-term rates rising soon, given the still-struggling economy.

Even so, a zero return on cash accounts has been more appealing to many Americans than the idea of losing another significant sum in the stock market.