Of course, you want to have a clear definition of what money market funds are. Who wants to invest in something that they really don’t understand. It is very important to get some background information about this kind of investment before making any decisions or opening an account of your own.
Money market funds are similar to mutual funds but without the risk. The lack of risk is often reflected in a lack of surprise as far as your return is concerned. While the stock market can be a virtual rollercoaster for some, money market funds are safer. There is, however, no absolute guarantee on your return.
It is very important that you make a clear distinction between money market funds and a money market account. The latter is simply a savings account established in a bank. Basically, the bank account is a special kind of savings plan that offers a higher percentage than your average package.
So, the money market accounts are not considered traditional savings accounts and they are not exactly like taking great risks on the stock market, either. I guess you can equate the money market funds to playing a game of poker knowing that you will leave with at least a few extra dollars.
There are some clear-cut reasons that money market funds are so valuable to many of us. First of all, they are ideal for those of us who like stability and safety. These investments are pretty stable and many offer a fixed return on your money. This stability is one of the most appealing aspects of these kinds of accounts, especially for anyone that is really relying on his savings.
Second, you don’t need to be rich to start up one of these accounts. You can start money market funds with a relatively small initial investment. This was the most appealing aspect for me when I started my account. I was waiting tables and I had a pretty modest income. The money market funds provided a way for me to start saving well without going broke in the process.
|
