This type demands a minimum balance deposit and with a limited number of transactions per month only . There ' s an easy access to your money through ATM ' s , checks and cash transfers here too and just like any other type of bank accounts , money market deposit accounts are also insured by FDIC . However , due to the conveniences it offers , the return rates are low ( compared to CD ) and penalties are present if you don ' t follow the minimum balance required or exceeded the limited number of transactions .
MONEY MARKET FUNDS
Money market funds are offered by brokerage firms and mutual funds institutions . These funds comprised of high liquidity and safe securities . It is also easy to access your money in this type of investment with a higher return rate compared to money market deposit accounts . However , money market funds are not covered by FDIC and the net asset value of the share price may go higher than $ 1 .
CERTIFICATES OF DEPOSITS ( CDs )
Debt instruments like CDs have specified maturity of 3 months to 5 years . Aside from banks , CDs can also be issued by brokerage firms . Certificate of deposits ( CDs ) is FDIC insured with high return rates than money markets depending on the maturity period set . The maturity date is fixed which means that you cannot get your hands on your money not until the maturity expires . You will have to pay a penalty if you want to get you money sooner than the maturity date .
US GOVERNMENT BILLS OR NOTES
These are offered by US governments and considered as the safest investment today , however , you can ' t get high returns here compared to money markets and CDs . Moreover , your original investment cannot be redeemed if you decided on not continuing the deal before the maturity ends . Treasury bills have maturity expiration of less than a year while treasury notes are fixed between 2 and 10 years . As this is offered by US governments , these types of investment are exempted from state and local taxes . You can buy one of these securities directly at the TreasuryDirect free of commission .
I BONDS
These savings bonds are offered by the U . S . Department of the Treasury and are endorsed by the US government which yields inflation-adjusted semiannual returns . This can be considered as one of the safest bonds as it is backed up by the US government and protects you from inflation . One advantage of these bonds is that they are available in affordable denominations ( from $ 50 to $ 10,000 ) and are exempt from local and state taxes . The only drawback here is that I Bonds are subject to a 3-month interest penalty if you decided to claim it within less than 5 years of issue date .
MUNICIPAL BONDS
Municipal bonds are also called “ munis ”. It is as safe as US Securities and exempted from federal , local and state taxes especially if you reside in the town that issued the bond . These debt securities are offered for the purpose of financing capital projects such as building schools , highways and other public infrastructure projects . Even though “ munis ” have lower interest rates , high-income investors seek this kind of investment because of its tax-friendly returns . And like some other type of investments listed above , if you decided to redeem your money before the maturity date , redeeming your original invested amount wouldn ’ t be possible .
CORPORATE BONDS
These are debt security issued by firms and corporation to finance various future operations . Compared to government securities , CD ’ s and money markets , corporate bonds often give higher returns however , the corporate bonds could suspend interest payments . If you plan on redeeming your bond before the maturity date , then you might not collect all the invested money you put . Moreover , commission fees are used to buy these bonds .
BOND FUNDS