A random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing

Internet Banks
Investors comfortable with the wide world of the Web
might wish to take advantage of online financial institutions
that reduce their expenses by having neither branches nor
tellers and by conducting all their business electronically.
Thanks to their low overhead, they can offer rates
significantly above both typical savings accounts and money-
market funds. And, unlike money-market funds, those
Internet banks that are members of the Federal Deposit
Insurance Corporation can guarantee the safety of your
funds. To find an Internet bank, go to the Google search
engine and type in “Internet bank.” You will also see many of
them popping up when you do a rate search on
www.bankrate.com for the banks with the highest yields. The

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Internet banks generally post the highest CD rates available in
the market.
Treasury Bills
Popularly known as T-bills, these are the safest financial
instruments you can find and are widely treated as cash
equivalents. Issued and guaranteed by the U.S. government,
T-bills are auctioned with maturities of four weeks, three
months, six months, or one year. They are sold at a minimum
$1,000 face value and in $1,000 increments above that. T-bills
offer an advantage over money-market funds and bank CDs in
that their income is exempt from state and local taxes. In
addition, T-bill yields are often higher than those of money-
market funds. For information on purchasing T-bills directly,
go to www.treasurydirect.gov.
Tax-Exempt Money-Market Funds
If you find yourself lucky enough to be in the highest
federal tax bracket, you will find tax-exempt money-market
funds to be the best vehicle for your reserve funds. These
funds invest in a portfolio of short-term issues of state and

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local government entities and generate income that is exempt
from both federal and state taxes if the fund confines its
investments to securities issued by entities within the state.
They also offer free checking for amounts of $250 or more.
The yields on these funds are lower than those of the taxable
funds. Nevertheless, individuals in the highest income tax
brackets will find the earnings from these funds more
attractive than the after-tax yields on regular money-market
funds. Most of the mutual-fund complexes also offer selected
state tax-exempt funds. If you live in a state with high state
income taxes, these funds can be very attractive on an after-
tax basis. You should call one of the mutual-fund companies
listed in the Random Walker’s Address Book to find out
whether they have a money fund that invests only in the
securities of the state in which you pay taxes.