PayPal money market fund accounts considered a convenient investment option

Most of us have heard of PayPal as it is a very popular online money transfer mechanism. But I for one had not heard of the PayPal money market fund. This is a fund which has been developed for account holders with PayPal. When you receive funds or deposit funds on PayPal, it would usually just stay dormant on the account till you made use of it. But now, you can accrue interest from the funds that are in PayPal. This is better than letting it be static in the account until you go about using it for any purpose. In other words, your money in the PayPal account starts working for you before you transfer it to a bank account.

At present, the interest rate offered by the fund is 4.5%, whereas a conventional checking account will provide only 1.27%. this means that if you put a $100 at the beginning of the year in the PayPal account and did not withdraw or deposit anymore money, you would end up with $104.5 at the end of the fiscal year; Whereas, if you had put the money in the bank in a checking account, you would get only $101.27 at the end of the year.

Before we invest in one, we need to understand if it suits our needs and aspirations. A money market fund is a kind of mutual fund and it is made of a pool of assets from a large group of investors and this pool of investments is put in a portfolio of investment instruments like bonds, stocks and securities. The mix of investments will depend on the risk that the investors are willing to take. Money market funds are the safest amongst the lot. They have the lowest risk and the highest liquidity.

The entire money market fund is managed by one person called a money market fund manager. These people are trained financial experts with degrees who go about deciding what should be done with the money. Its like this, if you do not have time to follow the fluctuations of the stock market you can decide to invest in the money market fund where a money market manager will follow the stock market for you and make the right decisions.

All you need for this is the PayPal account. if you do not already have one, all you need to open one is an email address. Once you have registered yourself for a PayPal account, the next step is to just leave the money dormant in the account. Any money which is not used will automatically be used for the fund. The dividends or returns are calculated on a day to day basis. They are then added up for the entire month and withdrawals can be made at any time.

There are very few risks associated with investing in a PayPal money market fund. It is one of the lowest risk exposures in the market, but it is not negligible. Bank accounts and certificates of deposits are protected by insurance provided by the FDIC or federal deposit insurance corporation up to a limit of $100000. But the PayPal account is not protected by this government body.