Enter the money market if you have cash to spend
A money market unlike popular belief can be applicable to just about anyone as long as you have the cash that’s waiting to drop off your wallet. A location that sees lenders and borrowers exchange their profits, a money market witnesses a transaction involving huge amounts for a certain period of time. But it doesn’t involve just large companies or businesses and the government only. For a common person who desires to earn something extra out of a small fund that he/she possesses while also having some security, this is a great option.
So what exactly is a money market fund? Well, it’s a kind of mutual fund with the primary role of investing in debt securities for a rather short term. Users can rest assure that there is a certain amount of safety involved with investment in such a fund mainly because it is managed by the Securities and Exchange Commission (SEC). The investment in money market funds on a general basis involves short-term CDs and or corporate commercial paper. When pitted against a bank account, the risk included with this kind of fund is nearly zero. At least consumers know for sure that the principal amount they have invested is very safe.
When offered a choice between a CD and a money market investment, it could be very confusing to decide the right one. Users must hence understand the highs and lows of both these kind of investments. Basically, CDs are like loaning a certain amount of money to the bank with which they proffer a certain amount of interest. The interest rate you have been delivered is directly proportionate to the time period of the investment. The time period is generally decided by the consumer. A longer chosen period for investment should yield a higher interest rate. As for a money market account, it is something identical to a checking account. This involves the balance from the users’ money market account so that it can be invested into securities like a mutual fund. With no boundaries of time, this kind of an account is highly dependent on the amount of money users have in their account.
Having a money market fund, users can write checks and also transfer money effortlessly into their checking account. However, the fund is not a savings account one then. The common notion is that a savings account is somehow more dependable. Though this is true for most instances, upon proper management, even a money market account can help users witness some returns on the money they have invested.
