Money Market Funds
Money Market Funds • Hedge Funds • REITs
In contrast, a money market account, known by its acronym MMA or more formally as a money market deposit account, is an interest-earning savings account with limited transaction privileges. As a savings account, the MMA is insured by the FDIC (whereas the MMF is not insured, and is therefore, subject to market losses).
The benefit of money market funds or money market accounts is that they are highly liquid (meaning that money can be withdrawn easily and quickly, without penalty), yet they offer higher rates of return than other liquid investments such as traditional savings accounts. For example, according to Bankrate.com, the average rate on interest-bearing checking accounts in July, 2006 was about 1.22%, compared to 3.34% on money market accounts and around 5% on money market funds.
If you're thinking about opening a money market account or money market fund, ask these questions first:
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Money Market Funds Guide