Before the Fed starts lowering interest rates, consider these money moves.

• It may be advantageous to move money with the possibility of interest rate cuts from the Federal Reserve, according to experts.
• Once the Fed starts cutting interest rates, the yields on money market funds will decrease, despite many investors currently earning 5%.
• Rates for high-yield savings and certificates of deposit could fall even sooner.

It may be advantageous to move money with the possibility of interest rate cuts from the Federal Reserve, according to experts.

The CME FedWatch Tool indicates that traders anticipate a rate cut in September, which may decrease the federal funds rate target range by up to a quarter percentage point.

Trillions of dollars are still earning above 5% in money market funds, which many investors are holding onto.

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Following a sequence of rate increases, investors flocked to money market funds, which typically invest in short-term, lower-risk debt, including Treasury bills.

As of July 17, total U.S. money market funds were close to a record $6.15 trillion, with $2.48 trillion specifically for retail investors, according to data from the Investment Company Institute.

If the Fed cuts rates in September, money market fund yields are likely to decrease, according to Ken Tumin, founder and editor of DepositAccounts.

He stated that most money market funds closely follow the federal funds rate.

There is still time to 'lock in' CD rates

The Fed's next meeting could indicate whether a September rate cut will occur. However, banks typically reduce rates on high-yield savings accounts and certificates of deposits before Fed rate cuts, according to Tumin.

Once it's clear that the Fed is about to cut, CD rates are likely to drop rapidly, according to him.

The average rate for high-yield savings accounts in the top 1% was below 5% as of July 25, while the top 1% for one-year CDs was approximately 5.5%, according to DepositAccounts.

Ted Jenkin, CEO and founder of oXYGen Financial in Atlanta, advised that it is a great time to "secure rates" for a 9-month or one-year CD, as he is a member of CNBC's Financial Advisor Council.

Shift to longer-term bonds

When constructing a bond portfolio, advisors take into account duration, which measures a bond's sensitivity to changes in interest rates. The duration formula includes the coupon, time to maturity, and yield paid throughout the term. Some experts suggest shifting from money market funds to longer-duration bonds for long-term investments, which could pay off if interest rates fall. Bond prices typically rise as interest rates fall, while money market fund investors can expect lower yields without price appreciation. While it is challenging to predict Fed policy, bonds could see a healthy lift if the Fed cuts interest rates by a full percentage point over the next year, according to Jenkin.

The optimal location for cash holdings depends on your investment objectives, risk tolerance, and time horizon.