Investments come in many different forms. At one end are stocks, which are considered fairly high-risk, but can give you high returns. On the other end are low-risk investments, including the money market. If you seek safety, security, and low-risk investments, money markets might be the right choice for you.What is the Money Market?
The money market trades short-term debt investments and lets you access funds at any time. Money markets include debt investments such as:
You can invest in money markets two different ways: With a money market account or money market mutual fund.
While both give you the opportunity to get into money markets, they aren’t the same thing. A money market account is like a high-yield savings account. It earns similar (but sometimes higher) interest. The interest is based on the interest rates in money markets. You always have access to your money, even getting checks and debit cards to make withdrawals.
A money market mutual fund, or just money market fund, invests in very liquid securities, or cash equivalents. The average maturity of a money market fund is 60 days or less. While most money market accounts are FDIC insured, money market funds aren’t. Money market funds could lose money if the market takes a hit.Why Is Your Money in the Money Market?
If you’re a conservative investor, you probably don’t want to risk losing too much money. The return on investment in the money market is low, but so is the risk. However, even with a low reward, you still stand to reap some benefits.Better than savings accounts
You get to put your money into money markets without worrying too much about loss. While all investments carry risk, money markets are among the least-risky investments you can have. They act like a savings and checking account, where you can access your money when you want it (although they limit withdrawals to about six per month). Interest is compounded daily, earning you more in less time than a traditional savings account.Instant access to cash
Sometimes investing in the stock market is a waiting game. If you sell your shares whenever you want, you could pull out before you’ve maximized earning potential. That could put you at a loss. It’s not the same as a money market account. If you need a place to put an emergency fund of a safety net for other expenses, money markets can get to your money without having to wait to cash out.
Low-risk investment for the conservative investor.
If you’re wary of putting your money into the stock market or you’re looking for another avenue to diversify your income, money markets might be a good choice. They’re generally fairly low-risk for conservative investors and those retiring in the near future.
If money markets aren’t right for you, consider putting your money in other safe, accessible places.
Even though the money market is relatively low risk, there’s still a chance of losing money if you put your investments in there. But keep in mind that your losses aren’t nearly as high as some other, riskier, investments, like stocks.
Money market accounts — not mutual funds — are often low-risk investments. As a result, they typically let your earn money while using it whenever you want. It’s a good idea for those who don’t care for riskier investments or are planning to retire soon.Investing Tips
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