The Best Money Market Deal

This isn’t a great time for cash investors when you figure the rate of return you’ll get after the inflation bite. But currently, bank products are the best of the lot, says Greg McBride, senior financial analyst at Bankrate.com, who also writes a Fed blog.

“Investors are focused on hunkering down and preserving principal that they’re looking at cash regardless of its after-inflation return,” says McBride. “If you’re going to do that, look at CDs, bank savings accounts, and money market accounts.”

Consider that the top-yielding money market accounts offered by banks are paying 3.5 percent and higher; meanwhile, the highest yielding money market mutual funds are paying roughly 2.5 percent. Not only are the bank money market accounts paying more, they offer the protection of FDIC insurance (on deposits up to $100,000 per person, per institution, and $200,000 for deposits on joint accounts).

Of course, many major fund shops have signed up for the Treasury’s guarantee program (click here for a list), but the temporary program applies only to balances held as of September 19.

And don’t forget CDs. A five-year version currently pays around 4 percent and offers risk-free FDIC protection.