Money Market Accounts
The modern savings account in a bank is a horrible investment. Many people looking for alternatives to it end up putting their money in a money market account (MMA) with an investment brokerage or other financial institution. The question is whether this is a good choice or not?
How do money market accounts work? Well, it depends on the specific account. Generally, they take the money they receive, pool it and then buy ultra low risk investments like treasury notes. These produce a small, but stable return that beats anything a traditional savings account will produce. Will you get rich from the return? Not a chance, but your money will be safe.
If you are just looking for a place to safely park money and are not worried about returns, a money market account can be a good choice. That being said, you need to be cognizant of the fact that the small rate of return you do receive may be eaten up entirely by fees charged by the institution offer the account.
When it comes to making your money go further, having a MMA is a great way to put your money to work, while not having to give up the option to have access to your cash. Banks are always trying to get people to make their money go further, but usually they will offer something like a CD, which will tie up your money for years and also pay out a low percentage.
Setting up your own MMA is easy and also allows you to earn a percentage on your money in the account, while also giving you the freedom to add and remove money as you like.
Banks aren’t the only place you need that you can setup a MMA. Many online brokerage firms and stock trading sites will have MMA setup for their customers. This way, when you don’t have money tied up in stocks, you are still earning a low percentage rate on the money that is sitting in your account.
The Beauty of Option Trading Strategies
Investing is a battle of the Ying and Yang with Ying being the profit potential of a trade and yang being the risk of losing money on that trade. Many savvy investors pursue option trading strategies to find a balance between these two elements. Options are perfect investment vehicles for this because they cost relatively little compared to the potential for profit. Given this, there are a number of different creative strategies one can come up with for options.
A classic example of one options trading strategy would be to buy a contract for commodity that you think the price is going to rise on. To protect yourself from a fall in the price which could cost you a lot of money, you would then buy an option to sell a contract at a price that would cover your potential loss. Ultimately, you cut out the risk of any big loss while maintaining your profit potential. No matter how you slice it, this is the general goal of any options trading strategy.
The three major types of financial markets are the equities, forex and commodities. In commodities markets, you trade in physical goods that include food, fuel, livestock, industrial and precious metals, etc. You can do commodity trading just as you do stock or currency trading. Some of the biggest exchanges for commodity trading are the Chicago Mercantile Exchange, the London Metal Exchange and the London Commodities Exchange. When you trade in commodities, you are actually betting on the future value of commodities just as you deal in standardized cash or stock market contracts.
Most commodity trading is futures trading since it is impractical to hold huge commodity stocks. In fact, you are buying or selling commodities at specified prices on certain future dates. Such contracts are referred to as forward contracts. The upfront investment, margin money, required to be paid by you for commodity trading is much less compared to that required for stock trading. However, commodity trading is faster compared to stock trading. This means that you have an opportunity to make money faster with good research, advice and instinct, but you can also lose easily if you are a little careless.