Cash Management Tools

What Cash Management Tools Are Available?

There are a number of short-term cash management instruments available to the individual establishing a sound cash management program. These alternatives include money market mutual funds, Treasury bills, and certificates of deposit.

Money market mutual funds simply pool investors’ dollars and purchase large denomination money market instruments. Individuals invest in the mutual fund for as little as $500 and receive the advantageous short-term rates.

These money market funds are totally liquid and may be accessed by check, debit card, telephone, or wire transfer.

Money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1 per share, it is possible to lose money by investing in money market funds.

Mutual funds are sold only by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

Treasury bills are simply IOUs issued by the U.S. government to meet its short- term need for cash. They generally have maturities ranging from 90 days to one year.

The minimum face value of Treasury bills is $10,000, which makes them one of the least costly items in the money market. However, they are sold at a discount to face value with the full face amount being paid upon maturity. The difference between the discounted price you pay for the Treasury bill and the face value you receive at maturity is the interest, or yield.

Treasury bills are generally regarded as one of the safest investments available because they are backed by the full faith and credit of the federal government as to the timely payment of principal and interest.

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