Bank deposits Money Market Fund

Same interest rate for life of deposit Interest / dividend rate fluctuates and money market fund managers can try to 'boost' the yield

Held in the bank, listed on bank balance sheet as a liability Shares held in a separate investment trust.

Rate determined by math compounding. Do the maths, know the interest rate. $10,000 times 1.023% is $10,230 dollars Rate of return on the money market fund is a function of the combined values of the underlying securities at any point in time.

Separate bank account Custody account, may be held locally, or somewhere else.

Do not change character, what you place on deposit is returned the same way as cash. Your cash is used to purchase shares in the investment trust. Redemption of shares returns your cash to you

No investment structure. Your cash sits dormant. It is segregated from your neighbor and brother-in-law by the name on the account, although many banks sweep your cash by investing it overnight and returning it to your account each day. Once your cash is invested in mutual fund shares, you will be one investor among thousands or millions owning shares in the same fund.

No asset allocation An investment policy statement listing sectors of diversification, currency will be used, i.e. the money fund may hold 30% in Japanese short-term bonds, 40% US treasury bills etc.

Can be use for loans / mortgages out to individuals and businesses purchasing homes, land, inventory, cars etc. This is the meaning of a savings and loan (S&L) business. For example, Customers make deposits and earn interest at 2.5%. The S&L (or bank) loans your deposit out to other customers looking to buy a home. The borrowers pay interest at 6.0% on the principal they borrowed, but you do not receive that amount. The bank keeps the difference as profit. Money market accounts can be used as collateral for purchasing other securities.

No individual securities - cash is never converted to other investments forms Underlying individual securities are composed of various types of short term debt instruments

Subject to loss if bank suffers cash drain, or severe liability exposure Subject to loss - market capitulation as in August 2007 when the commercial paper froze

Penalties for early withdrawal of cash or breaking the long-term deposit. No penalties for selling at any time. Money market funds are one of the most active markets in the world, trading 24/7

Fixed deposits are illiquid because of lock-ins and early withdrawal restrictions. Money market fund proceeds in cash can be available same or next day