What Is a Money Market Sweep Account?

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What is a money market sweep account?

What Is a Money Market Sweep Account?

Brokerage accounts and IRAs are not individual investments. They're simply accounts that are there to house the investments that you choose to buy within them. If you deposit cash into your brokerage account or IRA, then it will be uninvested until you decide to buy a stock, bond, mutual fund, CD, or other investment vehicle with it.

Because your money should not sit in cash without any growth, most firms and investment banks create something called a "sweep" account. A sweep account is a standard vehicle within a brokerage account or IRA that all incoming cash and dividends are "swept" into until the investor invests it. Sweep accounts offer a low-risk, low-return on cash and dividends that are uninvested. Often, this sweep account is a money market account. Money market accounts are the perfect choice for sweep accounts because they offer a small return while an investor decides what to do with his or her cash. They invest in low-risk securities like Treasuries so the investor does not need to be overly concerned about losing their liquidity. Money market sweep accounts are also FDIC insured.

   

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