The battle between the money market and the certificate of deposit
Keeping your money safe should be your top priority, especially during these harsh economic times. Luckily, there are several options that stand at your disposal and choosing one of them is entirely your decision. The money market and the certificate of deposit represent two of the most important options that you can use in order to secure your money. Their role is very well balanced and established by financial institutions, so a comparison is absolutely necessary in order to choose the right vehicle for your personal purpose.
There is a main, big difference between the money market and the certificate of deposit. This huge difference is represented by their liquidity. The money market offers the owner the chance to withdraw the money whenever he or she wants, without having to cover a penalty. This is not the case of the certificate of deposit; those who choose a certificate of deposit do it because they want to put a certain amount of money on hold for a certain period of time. By choosing the certificate of deposit, the financial institution’s client assumes the responsibility for penalties that will be charged when withdrawing money before the established term.
What is important to know about both the money market and the certificate of deposit (CD) is that they represent low risk investments. If you own a business and are constantly searching for investment opportunities, then it is a good idea to choose the money market. The money market accounts represent exactly what you need, as they are more liquid than the credit of deposit accounts. A great advantage of the certificate of deposit is represented by the fact that in most cases, it has a higher interest rate than the one available with the money market account. For investors who don’t need liquidity on a regular basis, financial specialists recommend choosing the CD in the detriment of the money market. However, they also recommend a solid research in which concerns the certificate of deposit. It is important to understand how it works, when it reaches maturity, who can issue a certificate of deposit, how long its term should be, as well as how the interest rate is structured. It is also important to learn something about the penalties that will be charged for early withdrawals.
Since the certificate of deposit appeared as banking product, it has been in a constant battle against the money market. When put face to face with both these types of accounts, people get confused and they don’t know what to choose. Specialists say that the only way in which a client can choose the best vehicle for his or her needs is by learning as much as possible about both of them. Write down your needs on a sheet of paper, note the advantages and the disadvantages of both the money market and the certificate of deposit and choose the one that best fits your problems. It is the only way in which you can be sure that you have made the right choice.
