Tuesday, July 7, 2009

Should I Utilize Money Market Accounts?

Money market securities are generally very safe investments which produce a relatively low return. These accounts are most appropriate for temporary cash storage or a short-term investment fund. Money market investments always have a maturity of less than one year, and in many cases, less than 30 days. Certificates of deposits (CDs) and treasury bills are good examples of money market securities. These investments are usually purchased in denominations of at least $1,000.

Money market investments are considered to be very liquid, and consequently, are usually included with cash on an individual’s or a company’s balance sheet. Their liquidity and relative safety make them an appropriate investment within an individual’s emergency fund. All investors should have an emergency fund consisting of between three and six months worth of expenses. This fund should only be used in emergency situations, such as a medical emergency or a loss of a job. An emergency fund should be established before any other type of investing.

Speak to a financial planning profession to learn more about the role money market accounts should have in an investment portfolio.

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