What are Money Markets?
Money Markets are short term investments. The most popular are Certificate of Deposits (CD) or Money Market accounts. I found some information to help us understand the money markets. Here is what I found…
Investopedia.com stated “The money market is often accessed alongside the capital markets. While investors are willing to take on more risk and have patience to invest in capital markets, money markets are a good place to “park” funds that are needed in a shorter time period – usually one year or less.”
About.com wrote, “A certificate of deposit is a relatively safe investment tool that allows a modest, predictable return. A primary drawback is that investing in a CD ties up the person’s funds until the maturity date.”
Back in the day, you could take 1000 dollars, place it in a certificate of deposit, and earn about 50 to 70 dollars in three months. But today you can take 5000 dollars, place it in a CD for two years, and get the same return. The banks are being more careful since the Great Recession. Since banks are not earning money through loans, they are not giving consumers high interest rates on money markets. To get a decent return on your money, you have to research other capital or real estate investments. This does not mean to not ever consider CDs or Money Market. This just means you have to wait to invest. So the best way to get a decent return is to keep your money in a savings account.