Money Market-Safe Investment with Sure Returns
Investors looking for low-risk low-return investment opportunities do not need to look beyond money market funds. You can get such investment choices from banks, mutual funds, and brokerage firms. Since the return is low, people do not look at these funds as a long-term investment plan. As such, these are appropriate for short-term scenarios that are for less than 1-year period.
Money Market vs. CD
Both money market funds and certificate of deposits are low risk, low return investment options for a short-term periods. The only difference is that cashing money market funds for emergency expenditure is easy than short-term deposits when you cannot get returns mid-term. The high liquidity of money market funds makes them an ideal choice for those who cannot afford the luxury of seeing their money grow over a period. Money market funds resemble mutual funds in their behavior.
It is possible to go for money market funds via an online brokerage. Alternatively, you can contact the associated provider directly for the same. When it comes to CDs, however, you need to sign up with your bank to get on with the proceedings. It is important to note that CDs are 100% safe by one cannot say the same for MMFs since these do not come with FDIC insurance assurance.
Money Market vs. Savings
Same as CDs, both savings accounts and money market funds are low-risk low return propositions. MMF along with saving accounts allows investors liquidity options as and when required. However, the returns related to savings account are not that good when compared to MMF returns. The rates associated with money market funds generally surpass anything offered by the saving account scenario. It is more similar with mutual funds or unit trust where pooling of money from different investors occur.
There are a number of different fees associated with your saving accounts such as withdrawal fee, depository fee, and dormancy fee. No such complications are there with your MMF. While an open-ended structure of fee remains, withdrawal costs are nil. Still, those who are after solidity and stability are better off with a savings account, but here they need to consider the associated limitations. MMFs are flexi-investment options that offer a whole gamut of possibilities not present with the savings accounts. Ultimately, it depends upon your outlook or attitude towards investment that is going to help you make the right decision regarding the vehicle you want to choose.
