Added: 03/21/2006 |
Money market account - the ground of business transactionsThe money market, in fact, is an organized exchange on which participants can lend and borrow large sums of money for a period of one year or less. An investor, who wants to invest smaller sums, can also find a money market account suitable, enjoying also the best liquidity and safety available. Let us know the types of money market instruments and the benefits they offer to an individual investor.
The money market account is a savings account with a competitive rate of interest in exchange for larger-than-normal deposits. As a rule, when dealing with money market accounts, you can meet restrictions on the amount of transactions you may make in a month, five or less. What is more, to open a money market account, you have to maintain a certain balance on the account to receive a higher rate of interest. Some banks require at least five hundred dollars, the others require a much higher balance, which is still relatively low. The money market account is an interest-earning savings account, offered by the FDIC-insured financial institution with limited transaction privileges. It is more formally known as a money market deposit account. The interest rate, paid by the financial institution on the money market account, is usually higher than its passbook savings rate. Another advantage of money market accounts is that they also have a minimum balance requirement. You can shop MMA rates on the Bank rate.
Individuals invest in the money market for much the same reason that a business or government will lend or borrow funds in the money market. Sometimes, you may have a possibility to invest spare money for a temporary need, where the money market account may be suitable. Although the money market account involves either a selection of long-tem or short-term investments, you can always choose among them. Keeping your funds in cash is a taxable pleasure to obtain; thus, if you invest your funds in the money market, you can quickly and easily secure your interests from taxes on cash.
If you ask about the guarantees on when investing in the money market account, you will be satisfied to know that the money market account offer all possible safety and liquidity options. The options to choose maturities that range from one day to one year, and often are three months or less, can also be advantageous for you personally. Being actively-traded secondary markets, money market accounts allow you to sell them prior to maturity, even though at the price of forgoing the interest you would have gained by holding them until maturity.
Coming to a decision to obtain a money market account, you should mind that you can usually operate through banks and large financial institutions. The form of your investment in case of the money market account may be reflected in federal funds, a discount window, negotiable certificates of deposit (NCDs), Eurodollar time deposits, repurchase agreements, government-sponsored enterprise securities and shares in money market instruments, futures contracts, futures options and swaps.
Being an individual investor, as well as a head of a company, you need to have a business or a bank responsible person for managing the securities portfolio of an individual or institutional investment. People, conducting your money market accounts, are called money managers. You will find it useful and convenient to have a person, who will employ other people with various expertises, ranging from a research and a selection of investment options to monitor your assets. A reliable money manager is able to drive away all the headache of yours, connected with buying and selling shares, choosing and managing investments prudently and developing an appropriate investment strategy.
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