ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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are always federally insured from FDIC
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are only available from banks or stock brokers and are primarily designed for high risk investors.
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by design provide lower rates of return than savings accounts because the money is invested in very short-term investments with a low risk.
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are designed to provide higher rates of return than savings accounts as the money is invested in very short-term investments with a low risk.
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Detailed explanation-1: -With all investments, you run the risk of losing money. Money market funds, however, are widely considered one of the safest, lowest-risk and least volatile investment options.
Detailed explanation-2: -Although the interest rate paid to a money market account may not be high relative to other investment options, both money market deposit accounts and money market mutual funds may provide more interest than a conventional savings account due to the underlying securities managed by the bank or mutual fund company.
Detailed explanation-3: -The U.S. government does not offer insurance on any type of mutual fund. Money market mutual funds, like bond and stock mutual funds, are investments, and, as such, are not guaranteed. It is important that investors understand that.
Detailed explanation-4: -Over time, common stocks have returned about 8% to 10% on average, including recessionary periods. By investing in a money market mutual fund, which may often yield just 2% or 3%, the investor may be missing out on an opportunity for a better rate of return.