The Downside Of Higher-yield Money Markets

Are you considering the higher-yield money market as a potential source of income with which to boost your nest egg

? Before you place your money in this high-stake investment vehicle, you'll need to know more about what this type of money market actually is, as well as its impact on your entire investment portfolio and your finances down the line.

A high-yield money market uses mutual funds that promise big returns - this very promise may be what got you interested in this type of investment in the first place. One consideration that you have to take into account when investing in this kind of money market is, no matter what some people say, that so-called "guaranteed" returns aren't really, well, guaranteed. Remember what they say about things that seem too good to be true.

Although the structure of these investments are normally designed to reduce the risk of investment losses, the people who manage this kind of fund can select high-risk vehicles to place your investments into - this is why promised yields can reach staggering amounts. Also, investing in markets that yield well will also need significant capital, which doesn't make this type of investment opportunity practical for those who have little in the way of investment-loss leeway.

Even with the best funds, the risk can still be too great for some investors who have extremely limited funds and very little time before they retire. This makes a higher-yield money market investment an option that isn't for everyone. If you aren't able to risk loss to your investment capital, go with low-cost, high-quality funds, money market accounts, or funds that provide reasonable gains at more acceptable risk levels. You might not make as huge a profit, but you'll be secure in the fact that you aren't putting your nest egg in danger.

by: Carina Smith

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