Tips on Checking Whether You Need to Get a Money Market Account

Despite the fact that many people invest for other people, such as parents investing for their children or a spouse investing for his partner, investments are still personal ventures that must be dealt with utmost personal assessment before anything else. And it starts with evaluating one’s current financial stability.

The first tip in dong this is to create a personal investment profile. This profile is a compilation of questions that will determine which type of investment is perfect for a certain person. This investment profile will most certainly be formed by queries such as the need for liquidity, the cash flow need, the investor’s risk tolerance, the income bracket and the rate of return.

For example, you are at the middle stage of your career (say, 36 years old). At this point in time, ask yourself how you want your life to be when you’ve finally retired. An older respondent near to retirement will not be able to respond to investment opportunities as aggressively as young people do. And this is directly correlated to risk tolerance.

Risk tolerance defines the degree of forbearance or acceptance of risky ventures at certain points in time. Like the example earlier, younger people are more likely to take risky ventures because they can still get back the losses that may be incurred with a failed venture compared to a person who is near retirement and cannot afford to lose their 401(k) plans or other retirement benefits just because of a failed investment.

The need for liquidity is another important aspect of investing. While there are many choices the offer high liquidity of assets, these are also the investment opportunities that give lower interest rates. So which is more valuable to you as an investor? The higher interest rates but low liquidity in investments or high liquidity with lower interest rates?

Given the fact that there are many different factors that affect a person’s decision to join a certain investment plan, it is best for each investor to do this personal investment profile first to determine how they are going to respond to the different perks and disadvantages of each investment policy. But since there are investment opportunities that can provide income and ROI without necessarily taking completely risky ventures, then it is reasonable enough to be the preferred choice of most investors.

Money market investments are high paying investments which answer the needs for high liquidity, high rate of return with low risks associated with it. Actually, it is a win-win situation for everyone since most investors will not really put a big amount of money in risky venture. Speculative investments get less financial back-up from people because no person would want to gamble with his hard earned money for an investment that is not federally insured with low liquidity.

With money market investments, more people will be willing to invest their money into it because it is a safer alternative—primarily because of the FDIC. With more investments means more ventures for the company and more ventures means more revenue that will consequently increase the interest rate that money markets will be able to provide its clients. And also, the rate of return is good enough for the safety it provides the investor.

This is probably the easiest way to solve people’s dilemma about uninsured investments and low-paying ones. With money market deposit accounts and mutual funds, everyone benefits from the investment scheme. Even the economy benefits because of the continuous flow of funding that fuels companies to enter more business ventures in the future. And the investors are also ensured that their investments are safe—especially those set aside for emergency purposes.