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Money Market Funds and Bank Products
This category offers investors interest for their money along
with easy accessibility, you can withdraw money at anytime.
However, because they are very safe, their yields are very low.
Money market funds are mutual funds that invest in low-risk,
short-term investments like treasury notes. One thing to keep in
mind is they are not insured by they government, like your
certificate of deposit(CD) and savings account. Nowadays, banks
are getting into the mutual fund and money market fund business.
A common misconception is that just because funds were bought
through a bank, they funds are government-insured. In fact, if
the fund does go bankrupt tomorrow, you just lost your
investment. Though that rarely occurs.
Only traditional bank products like CDs, savings and checking
accounts are government-insured for up to $100,000 total deposits
at a bank. So if your bank goes bankrupt, you will get all your
deposits(savings, checking, CDs, etc) back, up to $100,000. A CD
is like a long-term savings account, ranging from 9 month to 5
years. But if you take your money out of a CD early, you will
have to pay a penalty, usually equal to three month of interest.
Money market funds and bank products are great places to put your
short-term money because of their safety. They are not good for
your long-term goals because they offer very low returns.