Cash Investment Strategies: Your Guide To Profitable Opportunities

Cash investments are a great option for those looking for a safe, short-term place to keep their money while they research other investment products. They are also a good option for those who want to avoid the risk of losing money in a market downturn. Cash investments are readily available, have minimal market risk, and a short maturity period, usually less than three months. They are highly liquid, have a low return, and can be FDIC-insured. Money market accounts and certificates of deposit are examples of cash investments. While cash investments may not offer the same high returns as stocks, they are a good option for those who want to protect their capital and have easy access to their money.

Money market accounts

It is important to note that money market accounts are not meant for everyday spending and are subject to federal transaction limits. They are best suited for those looking to grow their money over time while maintaining easy access to their funds.

High-yield savings accounts

However, rates for high-yield savings accounts are variable and could fall. Some banks restrict withdrawals/transfers to only six a month. Checks generally can’t be written using savings accounts. Your money could get higher returns if you invest it. Not all online banks offer branch or ATM access.

• LendingClub Bank: No minimum opening deposit requirement and no monthly service fees.
• BrioDirect: Competitive yield on its High-Yield Savings account. You need to keep at least $25 in the account to earn the APY. You need at least $5,000 to open this account.
• EverBank: No monthly maintenance fee. Some savings accounts from other banks offer slightly higher yields.
• Bread Savings: Very competitive yields on its savings account. With just $100 needed to open an account and no monthly maintenance fees, savers of all types may find it to be an appealing option.
• CIT Bank: Very competitive yield. Like many online banks, it doesn’t have a monthly service fee. You’ll need at least $5,000 in the Platinum Savings account to earn a competitive APY.
• Bask Bank: No minimum balance requirement. The bank has a unique savings account, the Bask Mileage Savings account, where you can earn American Airlines miles.
• Popular Direct: Competitive yields. But those competitive yields have $100 minimum opening deposit requirements with the Popular Direct High-Rise Savings account. The account also has a $25 fee for closing it within your first 180 days.
• TAB Bank: Competitive yields. It’s also known for its unique checking account for truck drivers. TAB Bank’s High Yield Savings Account doesn’t require a minimum opening deposit and doesn’t have a monthly maintenance fee.
• UFB Direct: High-yield savings account and money market account. The UFB Portfolio Savings account offers a top-tier yield. It also offers ATM access, which isn’t offered by every online bank.

Cash management accounts

• Interest Rates and FDIC Insurance: CMAs generally offer higher interest rates than traditional savings accounts, often ranging from high 2% to around 5% APY. They also provide higher FDIC insurance coverage, typically ranging from $2 million to $8 million, by partnering with multiple banks and sweeping customers' cash into their FDIC-insured accounts.
• Fees and Minimums: Many CMAs have low or no fees, but it's important to check for potential charges such as ATM, foreign transaction, or overdraft fees. Some accounts may also have minimum balance requirements to qualify for certain benefits.
• Account Features: Cash management accounts usually include features such as a debit card, ATM access, direct deposit, check writing, and electronic transfers. Some CMAs also offer investment options and tools like round-up investing or portfolio lines of credit.
• Suitability: Cash management accounts are well-suited for individuals who want to combine checking and savings while also seeking higher interest rates and FDIC coverage. They are particularly attractive for those with large cash balances. However, CMAs may not be ideal for long-term savings goals, and some accounts require a linked investment account.
• Accessibility: Cash management accounts are often online-only, so in-person banking may not be available. Customer support can also be limited for some providers.

Overall, cash management accounts can be a convenient option for those seeking to streamline their financial account management while also benefiting from higher interest rates and FDIC coverage.

Money market mutual funds

Government funds invest in cash, US Treasury securities, and repurchase agreements that are collateralized by US Treasury securities. Prime or general-purpose funds invest in government securities, commercial paper, certificates of deposit, and short-term securities issued by domestic and foreign corporations. Municipal or tax-exempt funds invest the majority of their assets in securities that are exempt from federal income tax.

Money market funds are not insured by the Federal Deposit Insurance Corporation (FDIC), unlike money market accounts (MMAs) offered by banks and credit unions. While money market funds are considered low-risk, there have been instances where funds have "broken the buck", meaning their net asset value (NAV) dropped below $1.00. In these cases, the fund may be liquidated, and investors may receive less than $1.00 per share.

Money market funds can be purchased from banks, brokerage firms, and mutual fund companies. When choosing a money market fund, investors should consider the yield, expense ratio, type of fund, and any additional fees.

• Vanguard Federal Money Market Fund (VMFXX)
• Schwab Value Advantage Money Fund (SWVXX)
• JPMorgan Prime Money Market Fund (VMVXX)
• Invesco Government Money Market Fund (INAXX)
• Fidelity Money Market Fund (SPRXX)
• Vanguard Municipal Money Market Fund (VMSXX)

No-penalty certificates of deposit

No-penalty CDs are best suited for individuals who want to build savings but may need to make withdrawals to cover unexpected expenses. They are also a good option if you want to take advantage of rising interest rates. Unlike traditional CDs, no-penalty CDs allow you to withdraw your money early and transfer it to a higher-yield account without incurring a fee. This makes them a good choice if you want to benefit from rising interest rates without being locked into a lower rate.

When choosing a no-penalty CD, consider factors such as the annual percentage yield (APY), compounding schedule, minimum deposit requirement, and your savings goals. No-penalty CDs typically have lower APYs than standard CDs, so you may find better rates with other savings options. Additionally, partial withdrawals are usually not permitted with no-penalty CDs, and you may need to withdraw your entire balance.

Some of the best no-penalty CD rates are offered by online banks and credit unions, such as America First Credit Union, Ally Bank, Marcus by Goldman Sachs, Bank of America, and CIT Bank. These institutions often provide higher yields than traditional banks, and their rates can be competitive compared to other savings options.

Frequently asked questions