Money Market

April 28, 2010 By

The true definition of money market accounts is they are short-term debt obligations that are purchased and sold by different organizations who are working to manage their financial obligations. Money markets mature within one year of purchase and involve many different types of securities. One of the advantages of this type of investment is that when sold, they are usually liquid. There are two ways that shareholders can invest in money market accounts; the first is they can purchase in money market mutual funds or buy choosing individual securities. This type of investment has very little risk involved, but the rate of return is lower than the stock market.

High Interest Money Market
The beauty of high interest money market accounts is they carry a much higher interest rate than a traditional saving account. Investors have two choices when it comes to money market accounts; money market mutual funds and money market deposit accounts. A deposit account is an amalgam between a savings and a checking account. This type of account allows an investor to deposit money at a bank, credit union, or other financial institution. This organization is then liable for the interest and the amount of money that was deposited. This type of money market will allow the account owner to make withdrawals three to six times per month and it also restricts the amount of checks that can be written. Remember that deposit money market accounts differ from one financial institution to another, so it is important to shop around for the best deal possible. Each institution will also have their own requirement when it comes to minimum balances, market rates, and withdrawal, and check writing restrictions.

On the other hand, money market mutual funds rely on investment companies to purchase safe short-term securities with the funds invested. These securities can include certificates of deposit, commercial papers, and treasury bills. Unlike money market deposit accounts, the FDIC does not insure money market mutual funds.

Treasury Money Market
The Treasury will sell T-bills to investors as a way to raise money. To purchase these T-bills, a potential investor will only need to pay a small portion of the face value of the bill. This type of investment will mature in approximately three months and the bidding process allows investors to negotiate the purchase price. The U.S. Treasury issues securities or there are mutual funds that only deal in treasury securities, and this is what is considered a Treasury money market account. Because of the high reliability of this type of investment, individuals as well as companies participate.

This type of investment uses money that is invested to buy treasury money market securities. The reliability of this type of mutual fund is based on the knowledge that the treasury will always meet their debt obligations. Treasury mutual funds do have a low rate of return, sometimes as low as 0.01 percent during recessions and economic contractions.

Money Market Savings Accounts
Money market savings accounts are fixed-income financial products that are considered short-term investments that usually mature in less than one year. While investors must maintain large minimum balances, they will receive much higher interest rates than with traditional accounts. There are restrictions placed on this type of account including that account holders can only make six transfers or withdrawals per month.

The restrictions also state that only three transfers or withdrawals can be made by check. Although this type of account has restrictions on withdrawals, the account owner can make an unlimited number of deposits. If an account owner goes over the allowed amount of transfers or withdrawals, they will be charged a fee automatically. Money market savings accounts cannot be substituted for a regular checking account because of the restrictions on withdrawals and transfers. This type of account is usually used for saving for the future or as an emergency fund.

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The Complex Web of Calculating Mortgage Rates

April 21, 2010 By

The Federal Reserve has less of an impact on mortgage rates than many people think. Remember, the vast majority of mortgage interest rates are based on Mortgage Bonds and Mortgage Backed Securities, not prevailing federal interest rates or 10-year Treasury bills.

While it’s often true that 10-year T-bills or mortgage backed securities rates can be viewed hand in hand, there are times when the rates of each of these investments is moving in entirely different directions.

Also, when the Fed “lowers rates”, what’s really happening is that short-term credit rates are being lowered. Rates on credit cards, credit card offers, car loans, and even bank loans will fall, but longer term loans like mortgages won’t necessarily be affected.
The market is rapidly fluctuating all the time. Investors who see opportunities with short term stimulus cash will convert their bonds into stocks. So, a massive selling of mortgage backed securities then drives interest rates up. This is why it might be smart nowadays to avoid Adjustable Rate Mortgages, unless you’re willing to take a big risk on prevailing interest rates.

When the Fed cuts rates, mortgage rates will be affected very gradually. If you take a look at history, you’ll see that after a massive Fed cut, mortgage rates remain generally unaffected.

The Fed will affect these rates somewhat, but it’s nearly impossible to pinpoint exactly how and when rates are affected. Never, ever wait for an anticipating Fed cut to lock in a loan. Remember that when the Fed cuts rates, mortgage rates actually spike for a brief period of time. As a result, if you’ve found an interest rate that you like and you want to purchase a mortgage, don’t wait.

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Simplifying the Complexities of Motorcycle Insurance

April 12, 2010 By

Your motorcycle isn’t just an object or a mere means of transport. It’s a symbol of your identity and a significant financial investment. Protecting both it and yourself is important. The right type of motorcycle insurance can protect you in case of accident or theft. But, like all insurance, purchasing protection for your bike can be complicated. How should you choose the right policy for you?

There are several types of motorcycle insurance. The best policy for your needs depends on your driving record, the type of motorcycle you own, how much you owe on the bike, and state requirements for motorcycle riders. Most states require bikers to carry liability insurance, which is usually inexpensive and available from any insurance dealer. It covers other people in case of an accident, but not you or your bike. For that sort of coverage, choose collision insurance. However, if you bought your motorcycle with a loan, the bank will usually require you to get comprehensive coverage, which covers a wide range of potential problems. Whatever insurance you choose, make sure that it will replace your motorcycle in case it is stolen or in an accident.

Keep in mind that the more unusual or expensive your bike, the more it will cost to insure. A one-of-a-kind custom bike often requires more a more comprehensive insurance policy or special insurance riders. This also applies to particularly powerful machines, or bikes that are used in racing or other sports.

However, a skilled rider with a clean driving record should be able to shop around for an insurance policy with good insurance rates that provides protection at a wallet-friendly price. Ask around for recommendations for motorcycle-friendly insurance agents or reliable insurance companies. Motorcycle dealers, repair shops, or friends who ride should be able to steer you in the right direction.

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