Money market account
A money-market account can be had through a bank, a full- service brokerage firm, a discount brokerage firm, a mutual funds company, or through a credit union. It works like a bank account. You keep your money there, can write checks against it; there are various restrictions, but you can always find a money-market account to suit you. When you put your money into a money-market account, you are buying shares in a money-market investment fund. The share price does not fluctuate in value, the way it does with stocks or mutual funds. Money-market shares are priced at $1 a share. How is a money- market account different from a bank account? In the interest it pays, which can add up to more—sometimes far, far more— than you’d get from almost any checking or savings account, as well as the ways in which the money is protected.
One of the main reasons many of my clients back then were nervous about opening a money-market account is that the funds aren’t insured by the Federal Deposit Insurance Corporation (FDIC). Even so, funds in a money-market fund are extremely safe. Essentially, every money-market fund has a manager who oversees the money that people like you and me deposit into the fund and lends it out to different entities—the federal government, state governments, or various large institutions or corporations. These are all short-term loans, usually for about thirty days, and they have a nice interest rate attached to them. Because the payback is so quick, the risks are minimal, and as soon as these loans are paid back into the fund with the interest, that interest is passed on to you.
Tags: Market