SFGate.com on Money Market Accounts
The website SFGate.com features a piece entitled, "Rising rates attract smart savers back to money market accounts." The article tells us, "The recent increase in interest rates on various types of savings products is bringing back money market accounts. If you weren't around for their heyday in the 1970s and 1980s, when short term interest rates reached 20%, or if you've forgotten, this guide will get you up to speed. After all, the fed funds rate has increased from 0.25% a year ago to 5.00% today. We'll explain what a money market account is, what kind of rates you can get today and more, so that you can decide whether to add one to your portfolio." It states, "In financial circles, the money market is where high-quality, short-term debt securities are traded -- generally government or corporate bonds that mature in one to 30 days. These securities are usually safe because investors have a pretty good idea of what the world will be like a month from now. Money market account rates fluctuate to reflect current market activities, and they are especially robust when interest rates are increasing. Many investors like that they're relatively safe while offering higher interest rates than you can find on traditional savings accounts. Bankrate reports that as of June 28, the average savings account paid 0.25% interest, while bank money market accounts pay as much as 4.5% and Vanguard's Federal Money Market Mutual Fund has a 7-day yield of 5.03%." The piece adds, "A money market mutual fund is an account offered by a mutual fund company or brokerage firm. It invests in money market securities and usually allows regular withdrawals. Money market account interest rates tend to be higher than bank money market accounts, but mutual funds are riskier: These accounts are not federally insured."
