Money Market Account:
A Solid Solution
Money market mutual funds offer a convenient
and liquid opportunity for investment.


They may not be glamorous or bring extreme returns. But then, they aren’t meant to. Recently, money
market mutual funds have found their way into a broad variety of investor’s portfolios as their returns have
increased and their attractive reliability has continued.

Between June 2004 and September 2005, money market yields increased from over a half a percent, to
2.89 percent, according to an Associated Press story in early-September 2005.
1 A rather large jump to
say the least.

Serving as a temporary investment vehicle for those not ready to invest, money market mutual funds are
generally a short-term savings tool that, in comparison to many investments, is considered safer and
more reliable.

Using the advantages of a
mutual fund, a money market version typically invests in a variety of things
including CDs, U.S. Treasury securities and debt-obligations. By investing in a money market mutual
fund, you’re also benefiting from a possibility of higher returns than those available from individual
investment in a CD or money market account.

An investment in a money market mutual fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation (
FDIC) or any other government agency. Although money market mutual funds
seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by
investing in these funds.

Tax savings are another potential plus. You may be able to take advantage of a tax-free money market
mutual fund. These are usually funds that purchase short-term
debt from tax-free organizations, like state
or local government. While their yield is usually lower, you have the potential of saving the difference in
taxes.

Many money market mutual funds also offer an advantage if you’re invested in several other types of
mutual funds within the same fund company. A money market mutual fund can act as temporary storage if
you sell off assets in a mutual fund and wish to keep them in the fund company before investing in
another fund. In comparison to other options, this is a relatively easy way to transfer money between
funds and still potentially benefit while you choose your next mutual fund investment.

Money market mutual funds can serve a variety of investors but can be most attractive to smaller
investors. Many have easier withdrawal features including check writing or wire transfer if you choose to
close or move money from an account. Always consult with a financial professional before deciding what
investment moves to make. They may be able to guide you to a better option.

Investing in a money market mutual fund is meant for an investor with a specific set of circumstances and
objectives. They certainly aren’t glamorous, and they won’t help you retire in style any time soon. But they
may be able to offer you tax savings, which is always attractive.

1 – Meg Richards, “Money-Market Mutual Funds Surge,” Associated Press, September 4, 2005.
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Money Market Account