The large number of investment vehicles and tools can make choosing the right savings strategy difficult. Most conservative savers wishing to distance themselves from market volatility tend to choose either money market funds or bank savings accounts.
New rules recently went into effect that add safety measures to money market funds to protect consumers from negative market conditions, according to the Wall Street Journal. New provisions mandate that the investment firms hold at least 10 percent of their assets in cash or other liquid securities that could be converted to cash within a day, the newspaper reports. However, new regulations may reduce the yield these funds provide to investors.
Top-yielding savings accounts, in contrast, offer annual percentage rates that are four to five times higher than money market funds. This percentage would allow an individual who invests $100,000 in an online savings account to earn $3.50 a day as opposed to the 35 cents they may earn on a money market fund, the newspaper reports.
There is no one strategy that is better than the other. An investor's decision will depend solely on their individual savings goals. Both funds offer savings and insurance from negative market conditions.
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