The Money Market Account: A Shrewd Investor's Alternative

For anyone who has been involved stock market for some time and who knows the risks involved, then you have probably already discovered some of the benefits of a money market account. Some of you might be asking what a money market account is and how do they work. Fair enough. In order to determine why these types of accounts can be a great alternative to for the shrewd investor, it will help to define what exactly they are and then highlight some of the obvious positive points.

Essentially, a money market account is a form of savings account. These money market accounts are typically offered by banks and credit unions just like any other checking or savings account. Yet, there are some differences. A money market account has four distinctive differences:

They offer a higher interest rate than standard savings accounts
Higher minimum balance requirements ranging from $1,000-$2,500
Restrictions on the amount of withdrawals allowed each month (3-6)
Like checking accounts, a set number of checks can be written each month

Money market accounts are afforded many of the same privileges and protections that over forms of accounts, in both banks and credit unions. For example, any funds or monies kept in money market accounts are protected by federal agencies like the FDIC and the NCUA. These types of accounts are very often considered safer investments than stocks. Depending upon the amount of money you have in a money market account, you can end up earning quite a bit on interest. This factor is also influenced by the amount of the rate that the bank or credit union is offering.

The real selling point of money market accounts are that they can be summed up in the compounding interest earned on a monthly basis. This distinguishes it from other savings accounts and, for some investors, makes it a preferable option since their investments will yield better returns in money market accounts than in any other type of bank or credit union account. The restrictions on minimum balance and how many withdrawals can be done during the month limit the participants to certain types of investors who are serious about making money from interest and have the capital to begin with. A money market account is definitely serious business for the professionally minded investor.

About the author:

Sean Rasmussen is the webmaster and founder of Universal Wealth Creation.

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