The Definition of a Money Market Certificate
A money market certificate is a term used to describe a variety of short-term banking investments, including money market deposit accounts and money market mutual funds. Each account is different and offers both advantages and disadvantages to groups of investors.
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Identification
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Money market certificates offer a short-term cash investment for consumers who require interest without long-term commitments. The accounts are "designed to maintain a stable value," according to Jeffrey R. Kosnett, editor at Kiplinger's Personal Finance.
Considerations
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Some money market certificate accounts are insured by the Federal Deposit Insurance Corporation (FDIC). The Federal agency provides insurance for consumer bank accounts up to $250,000 in partner banks. A money market deposit account, one that earns a rate of interest set by the bank, is insured by the FDIC; however, a money market mutual fund that risks the total balance of the account on investments is not covered by the FDIC.
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Time Frame
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Money market certificates traditionally allow transfer of the investments in a matter of days or months. Investors view these accounts as liquid, meaning they can be moved fairly easily, as compared with Federal bonds that may mature in 25 years. Turning the certificate into cash is easy and rapid when the terms of the certificate are satisfied.
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References
Resources
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