Money Market Accounts have long since proven popular among those that would like to put their money to work for them in a safe and secure manner. Of course, there are many different ways to do this. Traditional blue chip stock would be among the most common although there is definitive risk with such stocks that previously did not exist. Case in point, formerly safe automobile “blue chip” stocks have now become worthless. This has led many to look towards investment venues ranging from saving bonds to the gold market. For those that would like something a little better than a bond and a lot less risky than gold, a Money Market Account is a worthwhile venture.
Getting involved in a Money Market Accounts is not all that difficult. This is one contributing factor to the popularity of a Money Market Account. Since it is not complex to become involved in, it draws in scores of those seeking a simple and conservative investment. For those that might not have a clear idea of what a Money Market Account entails, here is an overview:
The most basic explanation of what a Money Market Account is would be a variant on a mutual fund. In other words, the money that is placed in the Money Market Account will be managed by a person or team that seeks to get the most out of the investment capital that has been placed in it. Granted, the level of risk with a Money Market Account would not be as high as placing the money in a very aggressive mutual fund. So, the potential to completely lose all the money you have placed in the account is non-existent. Again, a Money Market Account is based on the concept of a mutual fund but is designed in such a way that the money deposited in the account is not placed at extreme risk.
What makes a Money Market Account so unique is that the goal of the account is to keep the share price of the fund at $1. This may seem a little obtuse but it is actually serves a greater purpose. Namely, the purpose here is for the bank to acquire as many shares as possible depositing so that the money can be re-invested by the money market manager. The money will be invested into such ventures as CDs, savings bonds, and short term conservative investments. The goal here will, of course, be to make more money with the initial investment capital.
Again, the process will be a relatively simple one. $1,000 in Money Market Account deposits will then be placed in a diversified portfolio of the various aforementioned investment vehicles. This is clearly designed to gain interest based profits. Once these interest points are acquired, the profits will be split among the investment manager and the person (or business) that has placed capital into the money market account.
Some may wonder why they cannot manage their own investments as opposed to working with a Money Market Account. Honestly, some people can handle their own investment strategies. Most people, however, lack the background to perform such investment management. Hence, it becomes necessary to look towards working with a financial institution and its professionals. A great deal of analysis, research, and effective short and long term trading is required to make something such as a Money Market Account work. A great deal of diversity is required for such a portfolio to work. Again, this brings forth a number of complexities that the average investor looking for a safe and reliable means of putting their money away for the future.
Money Market Accounts are offered by banks and come with much higher rates of interest than what would be accrued through a bond or a Certificate of Deposit. However, the higher interest rate means that a much larger initial deposit will be required. In some instances, the minimum amount of money required to be placed in certain accounts could be in the six figure range. Of course, not all Money Market Accounts require such high deposits. If they did then not very many people would be able to afford them. But, in general, you will have to put a few thousands of dollars into a Money Market Account in order to open one. It simply would not be worth it to the bank to offer higher rates of interest on very low deposit accounts when a Certificate of Deposit serves such a function.
One common reason that people will put money into a Money Market Account is because they are looking for a transitory investment vehicle. Does everyone that opens up a Money Market Account do so for the purpose of placing money in the account as a transitional investment? Obviously, the answer to this would be a resounding no. However, it can prove to be an excellent means in which you can amass profits on investment capital in a secure manner while seeking a more profitable – albeit riskier – investment vehicle.
It is also possible to perform a certain number of withdrawals per month with a Money Market Account. Usually, the number of withdrawals one can make per month is six. It is also possible to use the Money Market Account to write checks, which is a dramatic departure from what would be the case with Certificates of Deposits. While it is beneficial to be able to withdraw money from the account when needed, it can undermine the investor’s ability to procure a capital gain on the investment. You can’t draw interest on the capital if it is removed from the account. Of course, you would certainly gain a much greater return on the investment than what would be the case if the money was placed in a basic checking account.
While a Money Market Account may not be for everyone, there are those that will find working with such an account to be quite effective. As such, those looking to put their money to work for them may find a Money Market Account a wise venture.
High Yield Money Market Accounts