Park your money where it can’t get dinged

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Dear Dr. Don,
I have the benefit of finding the best place to park money while it sits. Right now it is not generating any interest. I know there are many options, and each option has many options. I am looking for the best rate and yield I can get. How do I narrow down these options?
— Keith Cache

Dear Keith,
When someone tells me they want to park funds, I think of money market instruments or bank products. Money market instruments are short-term debt securities with a final maturity of one year or less. A money market mutual fund invests in a portfolio of money market securities. In the business, these are called cash investments. In contrast, a money market account is a bank account and as such may be insured by the Federal Deposit Insurance Corp. A banking alternative to a money market account is a high-yield savings account.

You can use Bankrate’s compare rates tool to look at money market accounts and high-yield savings accounts. I did, and the highest annual percentage yield, or APY, shown was 1.15 percent for a high-yield savings account. Bankrate no longer tracks money market mutual funds. If you saw the current money market mutual fund rates you’d understand why it doesn’t. The highest-yielding money market account and savings account yields are four to five times the money market mutual fund yields.

If you’re staying in cash, you need to strike a balance between convenience, safety and yield. FDIC-insured deposits take care of the safety component, so you can focus on convenience and yield. Investors park money while waiting for an opportune time to invest it in other places.

Recognizing when the investment timing is opportunistic is a separate matter best left to you and your investment professional.

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