What Is a Money Market Sweep Account?

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What Is a Money Market Sweep Account?
What Is a Money Market Sweep Account? (Image: -bast-, www.everystockphoto.com)

Brokerage accounts are like baskets that hold all the positions you invest in like cash, stocks, mutual funds and bonds. Each brokerage account has what is called a "sweep" account where cash from sales or dividends go until you decide what to do with them.

Function

A money market sweep account allows the cash you make from dividends and sales to earn money while you decide where to invest it for the long term.

Significance

Money market sweep accounts help you to avoid taking any risk with the funds or lose money with uninvested funds.

Time Frame

You can leave funds in your money market sweep account indefinitely, though it may not be advisable to do so.

Misconceptions

Money market accounts are not always FDIC insured. Some are SIPC insured instead; these are funded by member firms rather than a government agency.

Size

Your money market account can grow without limits, but be sure to remember that, if it is FDIC insured, it is only insured up to $100,000; and SIPC insured, up to $500,000.

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