ANSWERS: 1
  • <h4 class="dechead">On One Hand: Bank Money Market Accounts.

    Money market accounts from banks are liquid accounts in which customers can make deposits and withdrawals and earn a competitive rate of interest. Any money in a bank-offered money market account would be FDIC insured up to the FDIC limits. Each bank determines what rate it will pay on its money market accounts.

    On the Other: Money Market Mutual Funds.

    Money market mutual funds are governed by the rules of mutual funds and account values are not guaranteed or insured. Money market fund managers invest in short term money market instruments and strive to keep money market share values at $1. Historically, only one money market fund has ever "broken the buck." In 1994, a fund got in trouble and paid off investors at 96 cents per share.

    Bottom Line

    Although not guaranteed or insured, money market mutual funds are considered a safe place for cash. At the end of 2009, individual and institutional investors had more than $3.2 trillion in money market mutual funds. In the low interest rate environment of 2010, money market mutual funds had trouble paying any interest after expenses and bank funds were free to set the rate at whatever level they deemed prudent. Check both options for the best rates.

    Source:

    EDinformatics: History and Types of Money Markets

    BusinessWeek: Money Fund Assets

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