Money Market Rates - Why are they a good thing?
Have you ever heard the term money market rates but not sure what the benefits are compared to other savings accounts? What is the different between money market rates, T-bills, Certificates of Deposit (CD), commercial paper, banker acceptance, Eurodollars or a repot? They are all investments in money market rates. Actually they are all intertwined in the money market rates.
The biggest difference between money market rates and other types of stocks is that the money market rates are more stable and trade on a much lower denomination than other type of stocks. If you are looking for security in your savings, then you may want to check out money market rates. They are more secure than most because the government federally insures them. They also have relatively short mature dates, and the deposit amounts tend to be lower. You can also get money market rates at any financial banking institution. Because you are able to buy these at any lending institution, you do not have to pay the high fees that brokers charge for handling your funds.
T-bills or Treasury bills are the normal money market rates that a lot of people choose. Analysts feel that a lot of people choose these, because the annual yield, which tends to be lower than in the stocks, also is the safest. It is also the most available to the individual investor. The daily looking at the yield can be done at home from your own computer. It is a great idea to check out different lending institutions on the Internet to find the most attractive yield for the amount of dollars you are going to be investing. You want to make sure your dividends from the accounts are as high as possible. They also tend to be more attractive to more small time investors, because the rates don’t dip at all. You don’t make as much as you would if you put your dollars in the stocks, but for those that just want to get your feet wet, they are definitely a safe return for your investment.
A certificate of deposit (CD) is a time deposit with a bank. They may not be withdrawn like a checking account. CD’s can be gotten at banks and must remain their for a specified amount of time. CDs offer a slightly higher yield than T-bills because they have a slightly higher default risk for the bank, but the chances that something will happen is small. Whatever way you decide to go, make sure you shop around, do your homework, and ask questions!