Best Liquid Funds
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Perry Said:
What investment would be best? We have $4K for our emergency fund--$ needs to be liquid but earn interest?We Answered:
Put the money into an internet bank. They pay as much interest as a CD would, but you can get the money anytime you need it. There are no fees, which you would have to pay if you put the money into a money market fund. It is also very easy to transfer money in and out of the account. For more on this including links to internet banks, click on http://www.vilkri.com/pubreader.php?page…Ben Said:
I want to buy a sony vaio laptop from best buy stores directly, can i use liquid money?We Answered:
any credit card will do.Vernon Said:
CD or Mutual Fund (or other?) for funds used in guardianship?We Answered:
For low risk investments, there are 3 good options:1) CDs
2) Money Market accounts
3) Short-term bond mutual funds
The problem with CDs is that each bank will only insure up to $100,000 through the FDIC. So, if you go with bank CDs, you will want to split the money into 3 different banks, so as not to exceed the 100 thousand limit.
Money market accounts are comparable to CDs, especially since the main securities that these funds purchase are bank CDs and Treasury bills. With a money market account, you get yields about the same as bank CDs, but with the ability to reinvest the interest every month when the interest is paid out. Also, most money market accounts have a check writing feature for checks above $250. Money market accounts only invest in ultra-short term bonds of very high credit quality, so there is almost no chance of losing money in them. To date, no single investor has lost money in a money market account (according to Eric Tyson, author of Mutual Funds for Dummies).
Short-term bond funds are not very susceptible to interest rate changes. Most of the time you get a slightly higher yield than with money market accounts, at a slightly higher level of risk. And, many short-term bond funds have the check-writing features as well. You can pick a fund with a duration of 1 - 2 years and be assured of very low risk. The only thing is that when you redeem shares, you will have to calculate a capital gains tax for your tax return. Money market accounts, on the other hand, always keep their shares set at $1, so there is never a capital gains tax to compute. Therefore, money market accounts are easier to deal with at tax time. (Note: you will still pay taxes on the interest with either type of account, unless you get a tax-exempt money market account which invests in municipal bonds).
When it comes to lending investments like money market accounts and bond funds, the yields on the bonds themselves are extremely competitive. In other words, one money manager is not going to find bonds that pay significantly more than another manager will. Therefore, costs become the single most important factor when selecting your money market account or short-term bond fund. Academic studies show this extensively.
For the lowest-cost money market accounts and bond funds, go with http://www.vanguard.com . They just released a study showing how Vanguard's money market and bond funds beat out all other competitor's over the last 10 years, in terms of total return. The conclusion was that their low costs were the reason for the dominance.
One last thing: Unlike banks, it is impossible for a money market account or bond fund to go bankrupt. Mutual funds like these are required to keep a dollar's worth of securities on hand for every dollar invested. In contrast, banks only keep about 15 - 20% of their money on hand, with the majority lended out.
Stacy Said:
What is the best online Business Money Market Account or CD that can be linked to an existing bank account?We Answered:
The best ones are the ones your bank offers, actually. All banks who have on-line services have these.Sean Said:
which is the best option for short term saving of money ?We Answered:
Without putting your money at risk the best options for such a short time frame will be some one of the three items you mentioned.From your options listed you will probably see increased returns in the order you mentioned. Liquid funds will likely have the least return, but completely liquid. A savings bank will also be very liquid but rates can vary from bank to bank. And finally, a FMP will be less liquid thus likely providing the higher return.
An FMP can have maturity time frame of 15 days, 30, 90, 180 or even a year or more. Given you need the money it seems in 6 months or less you could probably find an appropriate FMP that will mature within the time you selected.
With any of the options the amount you earn won't be very much, but typically when you make a pledge or guarantee to let someone hold your money for a specified amount of time you will receive a slight premium versus a completely liquid account.
Audrey Said:
Who offers the best interest rate for savings/money market account?We Answered:
E Trade offers 4.7%