Cash investments are short term investment, usually less than 90 days, providing returns in terms of interest payouts. Cash investments generally gives lower returns compared to other investments and are usually associated as investments with very low risks.
There are four choices for cash investing:
- Certificates of Deposit
- Money Market Mutual Funds
- Money Market Accounts
- High Yield Checking Accounts
Certificates of Deposit
Certificate of deposit (CD) is a savings certificate that entitles the bearer to receive a higher interest compared to a normal savings account. A CD bears a maturity date and a fixed interest rate, issued in any denomination, usually by a commercial bank.
Money Market Mutual Funds
Money market mutual funds are short term (6 months to 1 year) investment vehicles that invests only in low-risk securities such as certificates of deposit and government securities. Unlike other mutual funds, they try to keep their Net Value Asset (NAV) to $1.00 per share.
Money Market Accounts and High Yield Checking Account
Money market accounts and high yield check account are almost identical accounts offered by banks with slight rule differences. They allow the account holders to bear higher interest compared to a normal savings account, with the flexibility for the account holder to be able to write checks.