Money Market Accounts Explained

by Dennis Durrel

Investing your money can be scary especially in this tumultuous economic state. One of the most popular ways to invest your money is through money market accounts. They are basically a mutual fund that you invest in shorter investments.

The goal of money market accounts is to invest while limiting the chance that you have to run into losses due to the market fluctuating. All money market accounts are monitored by the SEC, the Securities and Exchange Commission.

The SEC set out policies in the early 1940’s that gave out provisions as to how they may be invested. These same guidelines state that an investors’ money market accounts must have a Weighted Average Maturity less than 90 days, and that the funds must be distributed so that no more than 5% is dedicated to one specific issuer.

Some of the most common money market accounts securities are short-term bonds, repurchase agreements, or even commercial paper. The SEC has also stated that all securities must be liquid with a stable monetary value.

A great thing about money market accounts is that they offer the account holder a high interest rate than a traditional bank account. However, it is worth noting that for many money market accounts you might be required to maintain a minimum balance in your account, and you may only be able to have so many transactions throughout a specific statement period.

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