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Even if you bought a money market fund from a bank it would not be guaranteed by the FDIC. Here's the blurb from PayPal's site:
"PayPal is proud to offer the PayPal Money Market Fund as an easy to use and valuable service to users. By partnering with Barclays Global Investors, PayPal brings to users the expertise of one of the world's largest and most experienced money managers.
The results have been exceptional. According to iMoneyNet, the Fund is currently the nation's highest yielding retail prime money fund, as ranked out of 307 investment companies. Additionally, PayPal's Money Market Fund features the flexibility of no minimum investment and no limit on withdrawals.
A money market fund is a mutual fund that invests in high-quality, short-term securities such as U.S. Treasury bills or notes. Rather than investing in stocks, it invests in stable, low-risk securities which emphasize attractive yields combined with safety of money."
Barclays is a major investment firm with $700 billion in money managed. A money market fund is very, very safe. Plus, how much do you guys have in your PayPal accounts? I've only nudged over $1,000 once.
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