Deciding on your investment strategy can sometimes be a difficult process, with a load of different investment options available to you. The problem is that sometimes, especially for the new investor it can be overwhelming the number of choices available. This can lead to many investors making difficult decisions that ultimately will cause them to lose more money than they are actually able to gain. This is why it is imperative that investors take the time to research their decisions thoroughly before making any major investment plunge.
Two of the major types of investments that a lot of people decide on for their reasonable safety are Certificates of Deposit and money market funds. While both are relatively safe investment options, they have very different yields that they can product, affecting the amount that you will make on your investment substantially.
Certificates of Deposit are considered to be extremely low to no risk investments. CDs offer you a set rate based on the market if you lock your money away for a period of time. Most CDs require that you put your money away for at least 5 years in order to get the best interest rates. This of course isn’t a reasonable option for most investors, so they would have to settle for upwards of a percentage point less in order to get a much shorter time of investment.
Another option however is the money market fund. The money market fund is quite stable and relies on mostly stable investments. They invest in CD’s, bonds, and stable stocks that have a long stable history. The difference however in a CD and a money market fund is that you have the potential to make much more money than a CD can yield depending upon the market. However, you could also lose money, whereas you are guaranteed a specific amount with a CD. Since the money markets generally have a low chance of losing money many people choose to take the slight gamble, knowing that the odds are very low that they will lose much money if any at all and that their odds of making money are relatively good. Plus with the ability to potentially make decent gains on their money, this is the obvious choice for money. Plus most money market funds allow the money to be withdrawn at any time or within short periods of time within a year or less. This makes the money much more readily available and useful to the investor who may need to access their money in the future.