Money market deposit accounts or mutual funds?

Due to the very erratic state of the economy, maybe depositing your hard-earned savings on the stock market would cause you several sleepless nights. On the other hand, with all the banks closing up, is it really safe to leave your money at their hands? In a time when the market is collapsing and people are losing their jobs, the question of where to put your money is most important.

Most people might feel safer if they just stuff their money in their sock drawers! Seriously, there is a better option for you. Let us discuss the difference between money market mutual funds and money market deposit accounts.

Money market mutual funds
In simplest terms, when you put your money on the money market mutual funds—it becomes part of your investment portfolio. More often than not, this portfolio of yours is at the hands of a broker who invests your assets.

The good thing about this kind of set up is how you have more control over your money. You can discuss with your broker a specific investment plan. This way, you can rely on your own decisions with regards to your money.

However, the problem with this set –up is that one wrong move can cause you to lose everything. Basically, your failure to invest wisely in the stock market is your own liability. You may have the satisfaction of berating your broker, screaming your head off but it would not bring your money back.

Money market deposit accounts
Looking at a very different option, you can put it in a deposit account. In this situation, you are giving your money to the care of your bank, instead of your broker. But unlike the broker you hired, the bank will shoulder your money and its loss as their liability—not yours. This way, not only do you have somebody else to blame but you can also demand your money back.

Since these are volatile times and it might turn out that your bank does not have the money, you can be assured that your money is insured by the U.S. government for as much as US$250,000. That way, your government will give you the assurance that you will get your money back.

Do not worry, this kind of deposit is also subject to the rates of the market—so you can take advantage of its benefits and still have safeguards set in place.