Got a couple of extra grand lying around, and you’re trying to figure out the best way to invest it? Given the madness in the world’s financial markets these days – stock markets plummeting, layoffs and cutbacks everywhere, the auto industry on the verge of collapse, huge and important financial firms declaring bankruptcy – many people are making the sober decision to invest their hard-earned cash into the world’s money markets. They can choose between a money market mutual fund or a money market account.
A money market mutual fund invests in short-term debt. In the United States, the Securities and Exchange Commission has determined that money market mutual funds can only buy debt of the highest quality and credit rating, that will mature in 90 days or less. So, it makes a lot of sense to look into a money market mutual fund if you are looking for safety and a decent return on your investment.
A money market account is different from a money market mutual fund. A money market account is offered by banks and other financial institutions and is guaranteed by the FDIC (Federal Deposit Insurance Corporation). That’s very good news in these troubling, uncertain times. Money market mutual funds, while having to invest in only high-quality debt, are not insured by the FDIC. Money market accounts can be drawn on by their owner, although only a few times – not like your average savings account. But the good news is that a money market account will pay a higher interest rate than a typical savings account.
To get the real inside scoop on whether a money market mutual fund is the best fit for your needs, or if it’s not, and you should really put your money into money market accounts, make sure you sit down with a qualified financial advisor and expert in order to determine your needs. Protecting your money should be one of your very highest priorities.