While all cash equivalent investments are
similar in providing liquidity and price stability, there are some important differences among the four major types of investments in this category: certificates of deposit (CDs), U.S. Treasury bills (T-bills), bank money market accounts, and money market mutual funds.
Some
cash equivalents,
such as money market accounts and money market funds, offer greater liquidity — or access to your money — while others, such as CDs, offer less liquidity but may pay higher rates of interest.
And some cash investments are insured while others aren't. The advantage of insurance is that you can be confident that your money is safe. But the drawback is that insured accounts typically pay a lower rate of interest than uninsured accounts.
Some experts also consider short-term bond funds as cash equivalent investments since they are highly liquid and their value is fairly stable. But unlike any other cash equivalents, you can realize capital gains or capital losses when you sell these funds.
