Financial experts explain the difference between cash deposits, money market mutual funds

HUNTSVILLE, Ala. (WAFF) - With the recent collapse of Silicon Valley Bank many are wondering where they should stash their assets.

Financial expert, Marshall Clay from The Welch Group explains the difference between traditional bank deposits and money market mutual funds. Clay says this has not been a big topic over the last several years because depository accounts and money market mutual fund accounts were essentially paying the same thing, 0%.

“Then with the advent of inflation, a lot of those money market mutual fund-oriented type of investments started paying a little bit more,” Clay said. “This is very timely because this is really what’s causing the banks a lot of stress recently.”

As for the difference between the two types of investments, Clay says the depository accounts are ones people are probably most familiar with such as checking and savings accounts.

“These accounts are FDIC insured, so that’s very safe money there,” he said.

Then there are money market mutual funds. Clay says these are investment products that are sold through brokerage arms, like Charles Schwab, Vanguard and Fidelity.

“The interest on those particular investment products is moved up to somewhere between 4-4.5% ]and] is likely to move up a little bit higher as a result of the Federal Reserve’s decision here soon. So those investment products are putting pressure on the banks because money is flowing out of these depository accounts into the money market mutual funds, and there’s a huge spread now, so you can get about 3-5% on your money,” he said.

Clay states that it is important now for people to understand where their cash is being positioned and whether are they getting the biggest bang for their buck.

For more ways to stay financially savvy, visit The Welch Group’s website.

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