Like a lame old mule in a pack of thoroughbred racehorses, the humble passbook savings account is making an improbable comeback these days in the investment derby.
It's not that passbook accounts, which have spent most of the last 20 years in well-deserved disfavor, have suddenly discovered some new source of vitality.Rather, falling interest rates have slowed the progress of many racier savings alternatives so drastically this year that the plodding passbook has almost caught up by default.
As of late May, according to data gathered by Bank Rate Monitor, money-market deposit accounts, or MMAs, at banks and savings institutions across the country were paying an average interest rate of 5.22 percent.
The average yield on money market mutual funds, as tracked by Donoghue's Moneyletter, stood at 5.53 percent.
So the sophisticated money managers who had their money in such modern vehicles were earning little more than holders of passbook and statement savings accounts, which provided returns in the 5.01 percent-5.09 percent range.
At times in the late '70s and '80s, passbook accounts in their time-honored 5 percent to 5 1/2 percent range offered barely half the return you could get on money funds, which first appeared in 1972, or bank money-market accounts, which came on the scene in 1982.
The variable returns on those new options helped them to grow rapidly, especially when interest rates soared close to or above two-digit levels.
According to the latest tally by the Federal Reserve, deposits in MMAs total $527 billion and money market fund assets amount to $371 billion ($515 billion if you count money funds run mainly for institutions such as pension funds).
Still, a large amount of money never left the passbook and statement savings category. Deposits of that type now total $427 billion.
Many a financial adviser has long lamented the apparent inertia or lack of information that left so many savers stuck with this low-yield product, devoid of tax advantages and scarcely meriting the name "investment" at all.
Even now that the yield gap has narrowed, these experts aren't changing their tune very much.
"Banks love passbook customers because these folks foolishly keep their money in passbooks year after year," says the newsletter 100 Highest Yields.
Should interest rates turn upward with a recovery in the economy, most analysts agree, yields on money market mutual funds can be counted on to follow, and MMAs will probably move up as well.
But financial institutions aren't expected to want, or see any need, to increase passbook yields beyond the levels that have prevailed in the past.
It remains to be seen what might happen with MMAs and passbook accounts should short-term interest rates decline further.
Conceivably, that could make it possible in the near future for institutions to promote their passbook accounts as offering higher yields than money funds.
On the other hand, this sort of tactic might stir up expectations among passbook savers that the institutions aren't prepared to satisfy in periods of higher interest rates to come.
In any interest-rate setting, passbook accounts do have some enduring appeal, if only for their convenience, to small and new savers with just a few dollars to put away.
Even in those circumstances, advisers urge careful shopping for accounts that don't defeat the purpose of the whole exercise with fees or special restrictions.