FDIC insured
Many cash investments offer the added security of being insured. High-yielding bank accounts and time deposits, such as money market accounts and certificates of deposit respectively, are both insured by the Federal Deposit Insurance Corporation (FDIC) to a limit of $100,000 per depositor. Money market mutual funds, on the other hand, are not insured by the FDIC — although a few fund companies provide private insurance. But depending on the company that offers the fund, the risk of default may be negligible. U.S. Treasury bills aren't insured either, but they are backed by the federal government, which can raise taxes to repay what it owes.
As you diversify your cash investments among savings, money market accounts and funds, CDs, Treasury bills, and other short-term investments, you'll want to weigh the absolute security of insurance against the drawbacks of lower yields and potential fees. |
Don Kittell
