Ratelines

Conduit IRAs
Conduit IRAs temporarily house funds that are distributed from qualified retirement plans.  These retirement accounts are helpful for storing a former employer’s funds, though this is not a permanent solution.  In fact, there are numerous limitations with how long funds can exist as Conduit IRAs.  Also known as Rollover IRAs, there are no special requirements to form a Conduit IRA, provided that the funds are commingled with other IRA funds.

Some companies use a model to ensure that a retiree will receive benefits equal to the amount of the employee contributions.  Not every defined contribution plan, however, is structured this way, which is why an employee must understand the terms and conditions that apply to the plan before participating. 

For more information on retirement planning and CD Rates go to www.cdrates.org

Money Markets
Short term debt obligations are purchased and sold by various institutions trying to manage their financial needs within money markets.  Numerous kinds of securities are exchanged on money markets, and they all mature within a year and are generally liquid.  Investors can invest in money market mutual funds or buy and sell money market securities themselves, and while the rate of return is lower than that of the stock market, there is little risk with these investments.

High Interest Money Markets
High interest money markets provide better interest rates and higher earnings than conventional savings accounts.  There are two kinds of such markets: money market deposit accounts and money market mutual funds.  The former is essentially an amalgam between a checking and savings account.  Here, an investor deposits money at a financial institution, which in turn is liable for the amount of the deposit and interest.  Account owners usually can only withdraw money market funds three to six times a month, and they can only write a limited number of checks.  These money market deposit accounts differ between financial institutions, as they will have different market rates, different minimum balances, and different maximum number of withdrawals.

Money market mutual funds are quite different than money market deposit accounts, as here investment companies purchase safe, short-term securities – commercial paper, certificates of deposit, and treasury bills – with the funds.  The FDIC does not insure these funds, unlike money market deposit accounts.

Treasury Money Market
To raise money, the Treasury sells T-Bills, and people pay only some of the face value.  T-Bills mature in three months, and consumers can negotiate their purchase prices by way of a bidding process.  Treasury money markets refer to money market mutual securities issued by the U.S. Treasury or money market mutual funds that are based exclusively on such Treasury securities.  In both cases, investors ranging from individuals to large groups can access this market, as Treasury securities are highly reliable.

The Treasury money market mutual funds use funds to purchase Treasury money market securities.  Because the Treasury will always make good on its debts, this mutual fund is very reliable though with a rather low rate of return.  In fact, return rates can be as low as .01% during economic contractions and recessions, which is virtually negligible.

Money Market Savings Accounts
A money market savings account invests in short-term, fixed-income financial products that mature in less than a year.  Money market savings accounts have higher interest rates than traditional accounts, and investors must maintain a relatively high minimum balance and can only make six withdrawals or transfers a month.  In fact, only three withdrawals or transfers can be made by check though the investor can make an unlimited number of deposits.  A person breaching these conditions will have fees automatically taken against his account.  Because of the conditions on withdrawals, these funds are not intended to substitute for standard checking accounts but instead be used for emergencies or future projects.

Wealth Management
Financial services that focus on wealth management provide numerous financial services – asset management, private banking, estate planning – to their clients.  In an optimal situation, a client will take advantage of these services that range from balancing the checkbook to long range estate planning.  Managing personal investment and tax planning are also popular aspects of wealth management, as they can generate or save considerable sums, thus adding to the client’s wealth.  Such services are helpful to those who have just begun acquiring numerous assets and either don’t have the knowledge or time to manage their personal finances.

Those who wish to begin wealth management must have a certain level of educational background connected to finances.  Attorneys, brokers, and certified public accounts can be involved in providing wealth management.  Attorneys can structure estates and trusts to complete estate planning.  CPAs can advise a client on tax matters so that he can be exempt from certain dues and then reinvest the savings so that it can grow.  There are also seminars and courses on wealth management that help educate other parties on the topic.

Stock Market Investing Strategies
Many people gain considerable wealth in the stock market; however, some do not and can even take a loss.  The trick is devising a smart strategy. One such strategy is as follows: first, it is wise to spread one’s risk.  One should never have all of his eggs on one basket; rather, he should put away his assets in multiple financial vehicles so that should one do poorly, the others can still balance those losses.  Second, an investor should somewhat limit his investment in the stock market.  The stock market is inherently a gamble and someone can always lose money on the investment; as such, it is wise not to put everything away into this venue.  There are many other kinds of investment opportunities that are less risky than the stock market, such as investing in cd’s and a person should spread out these investments to other markets. 

Third, a person should always take an interest in current events and market trends.  An investor should not put his money away into a portfolio and then ignore it; rather, he should stay focused on the market, his own assets, any wealth accumulation or losses, and make decisions if need be.  Should he hear of a potentially hot commodity, then the investor might consider liquidating some of his assets and investing in the item.

Get Rich Quick Schemes
A person can increase his wealth in a relatively short period of time but with considerable financial risk.  Some people utilize “get rich quick” schemes, which is where they acquire instant wealth at the expense of others.  These schemes tend to involve high investments with artificially high returns; for example, a broker may call investors, convince them to buy options, and then sell them at a lower price.  Get rich schemes usually involve a fast return on investment and they are generally unethical, as companies can take advantage of people who think they can earn money through minimal effort.  Because the idea of accumulating instant wealth through minimal effort is so appealing, many people do fall for such schemes.

Money Market Account Interest
Putting money into a money market savings account is very much like putting it into a savings account.  The process is similar.  The investor opens a money market account at the bank, the bank pays interest based on the deposits that gets put into the account, and then the bank loans that money to other people with a higher rate of interest than what they paid the initial investor.  The interest on money market accounts is compounded daily and paid monthly, though interest rates can vary from bank to bank as some incentive potential customers with higher rates.  Unlike savings and checking accounts, the more money a person puts into a money market account, the higher interest rate he will receive.  It is important that those interested in putting their money in such accounts talk with the banks about how the interest rates can fluctuate, and shop around for the best deals.

Banker’s Acceptance
Non-financial firms form banker’s acceptances, which are short term credit investments.  Banks are guaranteed to make payments, and these acceptances are traded at discounts from the face value in the secondary market.  A banker’s acceptance acts as a negotiable time draft for financing various transactions in goods for corporations, which is useful when a foreign trade partner’s creditworthiness is unknown.  A banker’s acceptance also does not need to be held until maturity, in fact, it can be sold off in secondary markets where institutions and investors trade such acceptance.

Treasury Bills
Treasury bills are a very marketable and popular money market security.  This stems from their simplicity.  Treasury bills are short term securities that mature in at most one year from their issue date, and their interest is the difference between that of the security’s purchase price and what one receives upon maturity.  To purchase a treasury bill, one must submit a bid.  Bidding is done non-competitively, where the bidder receives the full amount, or competitively, where the bidder has to specify the desired return.  With that latter, if the return is too high, it is likely the bidder will not receive any or all of the desired securities.

Treasury bills are popular due to their affordable nature, and they are considered risk free.  In fact, they are exempt from state and local taxes.  Unfortunately, one does not receive a large return of treasury bills as he would with corporate bonds, certificates of deposits, and money market funds; additionally, there are penalties for cashing out prior to the maturity dates.

Treasury bills also sell cash management bills by re-opening sales of bills that mature at the same time as an outstanding issue of bills.  Large investors and institutions purchase these bills through the commercial book entry system, which distributes such bills to individual investors.  Additionally, the individual bidders can utilize Treasury Direct, which is a non-competitive holding system for small investors who hold their securities until maturity.  If the investor wishes to sell the bills prior to maturity, he must first transfer them to the commercial book entry system, and this transfer can only occur with a depository institution, which holds an account at the Federal Reserve Bank.