Money market investing involves lending and borrowing money or assets on a short-term basis. Maturities usually last less than a year or up to 13 months maximum. Because of this nature, money market is considerably stable, safe and very liquid. Its core is made up of banks borrowing and lending with each other through various financial vessels. Trades in money market cover treasury bills, bankers’ acceptances, commercial paper, federal funds, certificate of deposits (CD’s), and mortgages that are short-lived. Investments on money market are held by a bank or by a financial institution. Due to the very conservative marketing strategy, money market may only give you minimal but modest returns. Most likely, on the average, it will be 2% – 5% per annum.
When you invest in money market, very minimal risks are involved but know that the interest rates drop down below the rate of inflation. Also, FDIC does not insure money market investments so there is a possibility that you may not recover any amount in case the financial institution that held your investment goes bankrupt. But this is very unlikely to happen. Investing on money market is highly likable for those who are not the aggressive type and who choose to get rich slowly but surely.
Money Market Rates
Finding the highest money market rates is very beneficial for an investor. Knowing that money market investments are very secure, being able to find the best rate with it may might as well seal the deal for you. Imagine receiving large returns from a secured investment. Here are tips on finding possible money market with high interest rates;
- Look for small banks rather than those who already have big names. They usually offer high rates to attract clients to invest with them.
- Look for financial institutions and related companies that operate online. Unlike banks that have a physical location, online banks can afford to offer better interest rates because they are able to save up on operational expenses (rentals and employee salary).
- After finding the bank or financial institution of your choice, read their reviews before investing immediately.
- Read and study the fine print. You’ll never know what goes behind all the attractive offers (“the catch”).
- Being not FDIC insured, as much as possible keep your investment secured.
Getting a Money Market Loan
There is a variety money market loans that you can avail of from money market because of the many financial instruments involved with it. This may not be a very great idea though. The rates with money market are very variable making it very hard to determine how much you’re going to gain in a given period of time. Inflation can also greatly affect your rate of returns because of its short-term operations.
Money Market IRA
Compared to a regular savings or checking account, money market IRA interest rates are higher. This is considered as one of the safest avenue where you can stash your savings. Money market IRA is a very conservative IRA account and it typically refers to a Traditional IRA or Roth IRA with investments placed on money market. IRA’s on money market are as safe as your retirement funds are.