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What are some problems with money market funds?

A problem with money market funds is that they are not insured by the FDIC. Other investments with similar returns, such as money market deposit accounts, online savings accounts, and certificates of deposit, are covered by the FDIC.

Why do some people invest strictly in cash?

Some people have a very low tolerance for risk. That is, these investors may not be willing to lose any of their investment, and may decide to invest their money in federally protected investments, such as cash, that earn interest over time. People may also have a shorter time horizon in which to use cash, and may want a less risky investment during this time.


What is a "bank"?

A bank is a financial institution licensed by the government that provides a variety of financial services, including: accounts in which to save (savings accounts, retirement accounts such as IRAs and 401(k)s, and certificates of deposit), spending accounts (checking accounts, debit cards, and ATM cards to make transactions), and loans (mortgage, equity, car). These institutions are profit-making entities that seek to give the highest possible return on investment to its investors, who can be both those who initially created the bank, and in the case of publicly traded banks, those who invest in ownership of the banks by purchasing its stock or shares.

What other services do banks provide?

Banks are also a great source of capital for account holders or those who have a relationship with the bank. You can take out loans for notable capital purchases such as house mortgages, automobile loans, home equity loans, small business loans, and large commercial loans for corporations. Banks also manage credit and debit card transactions. In short, banks provide the place to save money, the means to spend that money, and wholly new sources of money by way of loans that provide the fuel for our economy.

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