I have been trying to figure this out for a while and I don't know. Any interpretation any one can give me would be great. Thanks.
2006-09-14 05:10:41 · 7 answers · asked by Kay M 2 in Business & Finance ➔ Investing
Simple differences...
CD - Certificate of Deposit - These are investment vehicles where by you place a specified amount of money 'on Deposit' for specified period of time for a specified interest rate. As long as you don't withdrawl any funds from this account (which is difficult to do) then at the end of the term you withdraw the full original amount plus the interest earned. These are very safe investments with a known specific result.
Money Market - can be viewed as a 'merged checking / savings account'. Generally there is a minimum opening balance and minimum average daily balance. You can withdrawl and deposit funds but the number of transactions are generally limited per month before a transaction fee schedule kicks in. The interest rate is generally a variable rate based on the going prime rate. You can close the account at any time you wish with minimual penalties (if any).
How to use: Let's say you have a set amount say $10k that you want to invest. If you KNOW you will not need any of these funds for a period of time (6months or more) then purchasing a CD for this amount will give you a greater return (higher interest rate). However, if you feel that you may need portions of the cash over time or you wish to make use of the interest as it is earned then a Money Market is the way to go. Because of the uncertainty of the length of term and amount invested a money market account's interest rate is generally less than what you can get in a CD. Also, with CD's the more you put in and the longer the term, the higher the interest rate that is paid.
Hope this answers the question!
2006-09-14 05:21:52 · answer #1 · answered by wrkey 5 · 2⤊ 0⤋
The MAIN difference is that a CD you CAN NOT have access to your money for a predetermined amount of time. Think of a money market as a type of checking account. Actually some banks even give you checks for them. If you need to stay liquid Money Market is the way to go. If you don't mind putting your money to sleep (for around 6 months at a time) a CD will pay a little better interest.
Slainte,
-D
2006-09-14 05:13:49 · answer #2 · answered by chicagodan1974 4 · 0⤊ 1⤋
A CD is one type of money market security. There are other types -- but they are all very similar. As others point out to you -- once you invest in them, you pretty much have to wait until it is paid off to get access to your money. However, this is true of most money market securities (including T-Bills).
A Money market account, however, is really investing in a mutual fund that invests in money market instruments. They invest in a wide range of securities -- including CDs. There is always something maturing -- plus they have easy access to the secondary market -- so they can offer you more liquidity.
2006-09-14 06:45:02 · answer #3 · answered by Ranto 7 · 0⤊ 0⤋
CD's are time based, while money markets are not.
Both are 100% safe.
Also, contrary to popular belief, you can get money out of a CD early. You just pay a penalty in terms of lower interest earned. Your principal is always 100% accessible.
2006-09-14 05:15:29 · answer #4 · answered by AngiesHusband 5 · 1⤊ 0⤋
CDs are less liquid, meaning that you would have to pay a fee to withdrawl early.
Money market is basically a cash account, were you earn interest overnight.
2006-09-14 05:27:21 · answer #5 · answered by Anonymous · 1⤊ 0⤋
You get terrrrific music from a CD !! You'll never get a good rap song from a Money Market account !!!!
2006-09-14 05:14:47 · answer #6 · answered by philski333 5 · 0⤊ 2⤋
Cd's tend to have higher interest yields.
CT
2006-09-14 05:19:46 · answer #7 · answered by Anonymous · 0⤊ 1⤋