The Best Money Market Interest Rates

By Stock Research Pro • April 25th, 2011

Finding the best money market interest rates is important to any investor who is trying to put together a complete strategy for investing and money management. Money market investing is about leveraging short-term financial instruments that offer a high-level of liquidity and minimal risk. Typically, money market investments can be purchased or sold any time the investor chooses and can offer a transitory cash holding account. Money market investment instruments can include treasuries, certificates of deposit (CDs), bankers acceptances, short-term municipal notes (“Munis”) and more. As part of an overall money management strategy, many investors will keep cash in money market accounts when they are moving funds between investments.

The best money market interest rates

Money Market Investing

Money market funds are one type of mutual fund that is seen as a low-risk option for investors. Although money market funds are not FDIC-insured, the underlying instruments are view as relatively safe and these accounts will typically yield higher returns than regular bank savings accounts. In addition to relative safety, these accounts provide investors with a high-level of liquidity and the ability to move very swiftly into new investment opportunities as they emerge. While almost all money market funds have the same objectives of safety and liquidity, the underlying assets can differ depending on the specific strategy of the fund.

Types of Money Market Fund Investments

Three of the most common instruments that money market funds invest in can include:

  • Certificates of Deposit- Certificates of deposit or “CDs” are issued by banks to individuals and institutional investors to offer higher returns than regular savings accounts but with penalties for early withdrawal. Money market fund managers will often build “CD ladders” as a means of staggering the CD maturity dates within their holdings and address liquidity issues.
  • U.S. Treasuries- Short-term United States treasury bills may be the most common asset that money market mutual funds hold. Backed by the U.S. federal government, they offer minimal risk, short-term holding requirements, and a better return than most savings accounts.
  • Commercial paper- Investments in commercial paper typically offer the highest return available for money market funds, although these assets are more risky as they are issued by corporations and are therefore unsecured.
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    The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.

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