WHAT YOU NEED TO KNOW ABOUT MONEY MARKETS

CASH accounts are having a moment, thanks to the decent interest rates they now pay, at long last.

- DAVID MILSTEAD

But selecting one can be a daunting task given the profusion of choices—from money market accounts to money market mutual funds to a small clutch of newly hatched money market exchange-traded funds.

The term money market has become a catchall description for a variety of interest-bearing products that follow different rules. The offerings also vary in yield, ease of accessibility and, to a small degree, levels of safety. “In some respects, money market has become more of a marketing term than a technical term,” says Ted Rossman of Bankrate.com, a website that evaluates bank products. “There’s a lot of confusion about this.”

What’s an investor to do? We’ll lay out the various types of money market investments, all of which invest in high-quality, short-term debt and are appropriate places to stash cash for shortto medium-term goals, as well as what factors to consider before you choose one. (All data is as of April 30.)

We’re holding off on including money market ETFs in this discussion, however, because most are less than a year old. But if you’re interested in reading more about them, see “The ETFs Just Keep Coming,” on page 28.

First, an explanation about money market interest rates. They fluctuate, for starters, depending on market conditions and how their holdings perform. And you will see a variety of interest rates quoted. Each one offers an idea of how much your cash can earn over a 12-month period, but they’re not exactly the same.

Mutual fund money markets are required to report a seven-day SEC yield, which shows what the fund would pay in interest over a one-year period if rates of the past week stayed the same. It’s net of fees, so investors can compare one money market mutual fund to another.