Money Market Certificates

February 8th, 2006

What are money market certificates?

Money market certificates are certificates representing participation in a portfolio of money market securities or money market mutual funds. Money market certificates can be issued by banks or financial institutions. Investing in money market certificates means you are investing in money market funds.

Investing in money market certificates

Money market certificates are considered one of the most liquid securities you can invest in. If you are investing for a very short term, financial advisors often would recommend you investing in money market certificates. The interest rates you will earn from money market certificates will be very low but money market certificates are very safe investments, similar to putting money in cash at a financial institution and not investing at all.

How safe is investing in Money Market Certificates?

Any money invested in money market certificates will be pooled into the money market funds. All money in money market certificates earn small amount of interests such as 1-2% depending on the money market certificates themselves. Money market certificates are very liquid, you can invest in money market certificates today and liquidate all your money market certificates tomorrow without any penalties.

High yield money market certificates

The higher the money market certificates yield, the more similar the money market certificates are to Certificates of Deposit. The most liquid money market certificates yield much less in interests than the longer termed money market certificates. Therefore, the riskier the money market certificates, the higher their yields. If you are investing in money market certificates, make sure you compare the rates on money market certificates available at your local banks and financial institutions.

Certificates of Deposit