Money market funds provide you with a great way to save money for your short-term or long-term investment needs. A money market fund is different from a money market account as the money in a fund will be used to invest it into low-risk securities. Why do many people turn to money market funds when they are looking to grow their money? The biggest reason is due to the low-risk investment that these funds provide you with but the downside is that they are not backed by the FDIC.
Money Market Investments
A money market fund will be invested into different types of things like CDs along with government securities. The money market fund rates will vary with different lenders based on where the bank is invested their money. Any time you are dealing with investing you do need to be careful as you could have issues with things like losing money. This is one of the reasons why you need to make sure you are researching the bank that you are investing your money with in order to be sure that you understand all of the shareholder information.
Why Use Money Market Funds?
Most people that turn to money market funds will usually use them as a holding pool to earn money while they determine where they want to invest money into other accounts. A money market fund account can be used as a great way to help you save money for emergency needs along with for your other investment needs.
The Risk Of Money Market Funds
Know the risk when you are investing into a money market account. The money market fund rates vary with each lender and even if you invest your money into a bank that offers the fund, you need to watch out for the risk that they come with. Banks will not provide you with the FDIC security that you get with other investments with banks. When you use money market fund accounts you will see that banks are required to offer you a $1 share price. The risk that comes with these accounts is that sometimes banks are not able to maintain this share price.
Money Market Fund Rates
As you research banks, you will likely see rates for money market accounts near money market funds. The money market funds usually have a higher rate so you need to be sure that you are selecting the right one.