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Kim Butler

Partners for Prosperity, Inc.

City:Mt. Enterprise

State: TX

I have 20+ years of handling alternative investments in cash, growth and income for clients nationwide.  I strive to help my clients with all things financial in every way possible over the phone and the web.  I own an alpaca farm which I enjoy working during my downtime.  I also enjoy gardening, writing and reading books.  I also train other advisors on Prosperity Economics.

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Cash Accounts: Insured and Non-Insured

Millionaires invest a significant share of their cash in money market mutual funds, which pose higher investment risk than bank money market accounts. Learn more about insured vs. non-insured cash accounts.

| BY Adriana Reyneri

Millionaires invest a significant share of their cash in money market mutual funds, placing these assets at higher risk than funds held in cash accounts at banks participating in the Federal Deposit Insurance Corporation.

Cash accounts such as checking and savings accounts, certificates of deposits and bank money market accounts at FDIC-insured banks are generally guaranteed up to $250,000, according to the FDIC. But, not all investment products sold by a bank are insured by the FDIC, nor are money market mutual funds sold by a non-bank institution.

“The key point to remember when you contemplate purchasing mutual funds, stocks, bonds or other investment products, whether at a bank or elsewhere, is: Funds so invested are not deposits, and therefore are not insured by the FDIC – or any other agency of the federal government,” said the FDIC in a statement.

Despite the absence of FDIC guarantees, Millionaires invest more than 23 percent of their cash in money market mutual funds and less that 9 percent in FDIC-insured money market bank accounts. (About half is invested in traditional checking and savings cash accounts.) According to the Financial Industry Regulatory Authority, “Money market mutual funds play an important role in America's financial markets, offering a relatively lower-risk alternative for investors who seek stability and liquidity.”

Money market mutual funds use pooled cash to purchase high quality, short-term Treasury bills and corporate bonds, as well as CDs, according to FINRA. The funds are invested with the goal of maintaining a stable “net asset value” or price per share of $1 per share, a strategy designed to return one dollar plus interest for every dollar invested. As of May 2010, money market mutual funds accounted for roughly 9 percent of all U.S. mutual funds. (Our research also shows that retirees prefer money market accounts to other cash accounts.)

“Money market funds have traditionally attracted investors seeking to preserve their principal or who need a short-term place to invest their cash,” according to FINRA. “As with any securities investment, investing in money market funds involves risk—and while rare, investor losses are possible. In contrast to bank money market deposit accounts and other bank savings accounts, money market funds are not insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration.”


Losses can incur when a money market mutual fund NAV falls below $1.00 per share. The event, known as “breaking the buck,” has happened twice in the 40-year history of money market funds, said FINRA, and though money market mutual funds are relatively safe, they still pose greater investment risk than FDIC-insured cash accounts.