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A cash management account or CMA is a financial account offered by brokerage firms that combines some of the features of savings and checking accounts. Like a savings account, CMAs pay interest (often more than you would earn in a standard savings account). Like a checking account, CMAs provide access to checks and/or a debit card. In addition, CMAs are typically linked to brokerage accounts, making it easy to transfer funds you want to invest.

While CMAs can be convenient, they may also come with some potential downsides, such as monthly fees, minimums, and a lack of in-person banking options. And, you may be able to earn a higher interest rate elsewhere.

Is a CMA right for you? Our simple guide to cash management accounts can help you find out.

What Are Cash Management Accounts?

Let’s explore what a cash management account is exactly. A CMA or cash management account provides a solution for managing your cash flow and your money. The cash inside the account usually earns interest, so your money can grow over time. You also may have checking-writing capabilities, debit card access, or a combination of both.

Some of these nonbanking institutions charge low or no fees, another attractive aspect of using a cash management account. However, they typically make their money by charging fees for other services, such as investing, retirement planning, or financial planning services.

While traditional banking accounts have similar benefits, the biggest draw to a cash management account is that you can bank and invest with one company. This way, you’re not toggling back and forth between several companies or platforms to manage your money.

How Do Cash Management Accounts Work?

Now that you know what a CMA is in big-picture terms, let’s drill down on how they work. Cash management accounts are interest-earning accounts that offer a safe place to keep your cash. Since investment firms and robo-advisors are not banks, they don’t keep your money at their financial institution. Instead, they partner with several banks and spread your deposit out among them.

As with traditional bank accounts, account holders can deposit funds, withdraw funds, and transfer money. You also typically have online access to your account, making it easy to check on and manage your CMA.

In addition, CMAs typically earn interest like savings accounts and have checking account capabilities. Therefore, they can act as a way to merge these accounts into one. However, some CMAs may not have features of both accounts, so check with the institution to determine what features are available.

What Are the Pros of Cash Management Accounts?

Understanding the benefits of using a cash management account can help you determine if this is the right banking solution for your needs. With that in mind, here are several advantages of using a cash management account.

Convenience

The most significant pull for consumers to open a cash management account is that they can keep their investments and banking under one umbrella. Keeping everything in one place can simplify your money management efforts.

Traditional Banking Features

When you open a cash management account, you typically have access to traditional banking features like:

•   Direct deposit

•   Complementary ATM networks

•   Electronic bill pay

•   Third-party payment site access

But before you open an account, make sure you check with the institution about their banking services. This way you can ensure they have everything you need.

FDIC Insured

The Federal Deposit Insurance Corporation (FDIC) protects your banking deposits from losses up to $250,000 per depositor, per insured bank, for each account ownership category.

So, in the unlikely event that your bank should fail, you can recover your funds (up to the insured limit). While nonbanking firms can’t offer FDIC insurance directly, their partner banks can extend coverage. Since nonbanks spread funds across several partner banks, each can offer up to $250,000 of FDIC insurance per depositor.

💡 Quick Tip: Don’t think too hard about your money. Automate your budgeting, saving, and spending with SoFi’s seamless and secure mobile banking app.

What Are the Cons of a Cash Management Account?

CMAs also come with some potential downsides. Here are some points to keep in mind as you decide whether a CMA is right for you.

Lower Interest Rates

While these accounts do offer some earnings, you will often find better rates at online banks. If you are planning on parking a large sum of cash in an account, it can literally pay to explore your options elsewhere and see what annual percentage rates (APYs) are available for online savings and checking accounts. You may find a better place to park your short-term savings than a CMA.

Recommended: APY vs. Interest Rate: What’s the Difference?

Fewer Features

Cash management accounts may not offer all the conveniences that come with standard checking accounts, such as bill pay, and may not fully replace a checking account.

No Physical Branches

Many cash management accounts are offered by online brokerages and robo-advisors, which means you won’t have brick-and-mortar locations to visit. If you are the kind of person who prefers personal interaction, this may be a significant issue for you.

Cash Management Accounts vs Checking Accounts

While cash management accounts offer similar services and features to traditional bank accounts, you might wonder what the differences are. If we break down CMAs compared to checking accounts further, these features are worth noting.

•   Maintenance fees. Some CMAs don’t charge maintenance fees, but others may charge monthly fees routinely or when your balance dips below a certain threshold. This is also the case with traditional checking accounts.

•   Interest earning. Many cash management accounts pay interest, and rates are often better than what you could earn in a standard savings account. This gives CMAs an edge over regular checking accounts, which typically pay little or no interest.

•   Account integration. Investment firms and robo-advisors usually offer cash management accounts, as well as brokerage, or investment, accounts. You can usually link your CMA with your brokerage account, making it easy to move money and automate contributions. Traditional banks may also offer retirement and investment services. However, that’s not their primary business. Also, if you have your bank accounts and investment accounts under different roofs, there may be a time lag for transactions, which usually doesn’t happen with CMAs.

Considerations When Comparing Cash Management Accounts

If you’re thinking about opening a CMA, it’s a good idea to shop around and compare your options. Here are some things to keep in mind.

Customer Service

When you need an issue resolved with your money, it’s nice to know customer service is there to help. Check to make sure that the company you’re considering offers a robust customer service solution to assist you with all of your questions or concerns. For online firms, check out the hours that support is available and find out if you’ll be interacting with a human or an automated assistant.

Minimum Balance Requirement

CMAs can have minimum balance requirements to avoid fees and/or keep the account active. Therefore, you’ll want to determine these requirements in advance to see if you have the appropriate sum of cash to deposit.

Investment Management

Most of the institutions that offer cash management accounts offer investment services. If you’re looking to use their investment service, make sure you select a company you trust and feel comfortable with. You’ll also want to ensure the investments offered are suitable for your needs.

Is a Cash Management Account a Good Fit for You?

A CMA can be ideal for people who like to manage their investments and bank accounts under the same umbrella. It may make managing your money somewhat simpler and smoother.

But for those who feel a bit uncertain about using online institutions or mobile apps to complete their daily transactions, a traditional bank account may be a more viable solution. Also, if you would prefer to separate your investments and banking needs, a high-interest checking or savings account may make more sense that stashing your funds in a CMA.

The Takeaway

CMAs are interest-earning alternative solutions to traditional bank accounts like checking and saving accounts. Since investment firms usually offer CMAs, you can keep your investments and banking needs in one place, streamlining your money management efforts. As with most services, there are pros and cons to these accounts. Determining whether one is right for you will depend on your money management style and goals.

If you feel more comfortable with a savings and checking account held at a bank, SoFi offers a smart, money-savvy solution. Our online bank accounts, when opened with direct deposit, are fee-free and earn a competitive APY. Qualifying accounts can even access their paycheck up to two days early. We think it’s a great combination of convenience and money-growing features that you’ll love.

Ready to bank better? Come see what SoFi offers.

FAQ

What is the purpose of a cash management account?

Cash management accounts give consumers a way to earn interest and complete everyday banking transactions (like making purchases with a debit card and writing checks) while managing investments, all under one roof.

What type of account is cash management?

A cash management account is like a traditional bank account, except it’s offered by a non-banking firms, like an online investment firm or robo-advisor. You can complete transactions (direct deposit, withdrawals, check writing, etc.) and earn interest in the same way you would with a traditional checking or savings account.

Is a cash management account the same as a money market account?

No. While cash management accounts and money market accounts have similar features (like earning interest and providing access to debit cards and/or checks), they are not the same. Banks offer money market accounts, while nonbanks like brokerage firms and robo-advisors offer cash management accounts.

About the author

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.

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The Fear and Greed Index is a tool developed by CNN (yes, the news network) to help gauge what factors are driving the stock market at a given time.

If you’ve ever taken a look at how the market is doing on a given day and wondered just what the heck is going on, the Fear and Greed Index may be helpful in deciphering the overall mood of the markets, and what’s behind it.

What Is the Fear and Greed Index?

CNN’s Fear and Greed Index attempts to track the overriding emotions driving the stock market at any given time — a dynamic that typically toggles between fear and greed.

The Index is based on the premise that fear and greed are the two primary emotional states that influence investment behavior, with investors selling shares of stocks when they’re scared (fear), or buying them when they sense the potential for profit (greed).

CNN explains the Index as a tool to measure market movements and determine whether stocks are priced fairly or accurately, with the logic that fear drives prices down, and greed drives them up, or is used as a signal of when to sell stocks.

There are specific technical indicators used to calculate the Fear and Greed Index (FGI), and strategies that investors can use to inform their investment decisions based on the Index.

Understanding the Fear and Greed Index

The Fear and Greed Index uses a scale of 0 to 100. The higher the reading, the greedier investors are, with 50 signaling that investors are neutral. In other words, 100 signifies maximum greediness, and 0 signifies maximum fear.

To give some historical context, on Sept. 17, 2008, during the height of the financial crisis, the Fear and Greed Index logged a low of 12. On March 12, 2020, as the pandemic recession set in, the FGI hit a low of 2 that year.

Seven different types of stock indicators are used to calculate the Fear and Greed Index.

CNN tracks how much each indicator has veered from its average versus how much it normally veers. Then each indicator is given equal weighting when it comes to the final reading. Here are the seven inputs.

1.    Market Momentum: The S&P 500 versus its 125-day moving average. Looking at this equity benchmark relative to its own history can measure how the index’s 500 companies are being valued.

2.    Stock Price Strength: The number of stocks hitting 52-week highs and lows on the New York Stock Exchange, the largest of the world’s many stock exchanges. Share prices of public companies can signal whether they’re getting overvalued or undervalued.

3.    Stock Price Breadth: The volume of shares trading in stocks on the rise versus those declining. Market breadth can be used to gauge how widespread bullish or bearish sentiment is.

4.    Put and Call Options: The ratio of bullish call options trades versus bearish put options trades. Options give investors the right but not the obligation to buy or sell an asset. Therefore, more trades of calls over puts could indicate investors are feeling optimistic about snapping up shares in the future.

5.    Junk Bond Demand: The spread between yields on investment-grade bonds and junk bonds or high-yield bonds. Bond prices move in the opposite direction of yields. So when yields of higher-quality investment-grade bonds are climbing relative to yields on junkier debt, investors are seeking riskier assets.

6.    Market Volatility: The Cboe Volatility Index, also known as VIX, is designed to track investor expectations for volatility 30 days out. Rising expectations for stock market turbulence could be an indicator of fear.

7.    Safe Haven Demand: The difference in returns from stocks versus Treasuries. How much investors are favoring riskier markets like equities versus relatively safe investments or assets, like U.S. government bonds, can indicate sentiment.

The Fear and Greed Index page on the CNN website breaks down how each indicator is faring at any given time. For instance, whether each measure is showing Extreme Fear, Fear, Neutral, Greed, or Extreme Greed among investors.

“Stock Price Strength” might be showing Extreme Greed even as “Safe Haven Demand” is signaling Extreme Fear.

Tracking the Fear and Greed Index Over Time

The Fear and Greed Index is updated often. CNN says that each component, and the overall Index, are recalculated as soon as new data becomes available and can be implemented.

Looking back over the past several years, the Index has tracked market sentiment with at least some degree of accuracy. For example, prior to the COVID-19 pandemic, the market was seeing a bull run and hitting record levels — the Index, in late 2017, was nearing 100, a signifier that the market was driven by greed at that time.

Conversely, the Index dipped into “fear” territory (below 20) during the fall of 2016, when uncertainty was on the rise due to the U.S. presidential election at that time. Note, too, that midterm elections can also affect market performance.

How Does the Fear and Greed Index Fare Against History?

As mentioned, the Index does appear to capture investor sentiment with some degree of accuracy. The past few years — which have been rife with uncertainty due to the pandemic — have shown pockets of fear. For example, the Index showed “extreme fear” among investors in early 2020. That was right when the pandemic hit U.S. shores, and absolutely devastated the markets.

However, over the course of 2020, and near the end of the year, the Index was scoring at around 90, as the Federal Reserve stepped in and large-scale stimulus programs were implemented to prop up the economy.

Interestingly, the Index then dipped down into the “fear” realm in late 2020, likely due to uncertainty surrounding the outcome of the U.S. presidential election. It likewise saw a fast swing toward “greed” in the subsequent aftermath. Similar dynamics were seen in 2024.

Again, these largely mirror what was happening in the markets at large, and economic sentiment.

How Does the Fear and Greed Index Fare Against Other Indicators?

While the Fear and Greed Index does fold several indicators into its overall calculations, it is more of an emotional barometer than anything. While many financial professionals would likely urge investors to set their emotions aside when making investing decisions, it isn’t always easy — and as such, investors can be unpredictable.

That unpredictability can have an effect on the markets as investors may panic and engage in sell-offs, or conversely start buying stocks and other investments. Ultimately, it’s really hard to predict what people and institutions are going to do, barring some obvious motivating factor.

With that in mind, there are other market sentiment indicators out there, including the American Association of Individual Investors (AAII) Sentiment Survey, the Commitment of Traders report published by the CFTC (one of several agencies governing financial institutions), and even the U.S. Dollar Index (DXY), which can be used to measure safe haven demand. They’re all a bit different, but attempt to capture more or less the same thing, often with similar results.

For instance, while the Fear and Greed Index showed a state of fear in mid-March, the AAII Sentiment Survey likewise showed a majority of investors with a “bearish” sentiment as well during the same time frame.

And, of course, there are a number of other economic indicators that you can use to inform your investing decisions, such as GDP readings, unemployment figures, etc.

Dos and Don’ts of Using the Fear and Greed Index

Why is the Fear and Greed Index useful? The same reason that any sort of measurement or gauge has value. In this case, measuring sentiment can help you determine which move you want to make next as an investor, and help you ride investing trends to potentially bigger returns.

Are you being too greedy? Too fearful? Is now the time to think about herd mentality?

Also generally, some investors often try to be contrarian, so when markets appear frothy and the rest of the herd appears to be overvaluing assets, investors try to sell, and vice versa.

Recommended: Should I Pull My Money Out of the Stock Market?

Dos

Use the Index to realize that investing can be emotional, but it shouldn’t be.

You can also use it to determine when to enter the market. Let’s say, for instance, you’ve been monitoring a stock that becomes further undervalued as investor fear rises, that could be a good time to buy the stock.

Don’ts

Don’t only rely on the Fear and Greed Index or other investor sentiment measures as the sole factor in making investment decisions. Fundamentals — like how much the economy is growing, or how quickly companies in your portfolio are growing revenue and earnings (which will be apparent during earnings season) — are important.

For instance, the FGI may be signaling extreme greed at some point, with all seven metrics indicating a rising market. However, this extreme bullishness may be warranted if the economy is firing on all cylinders, allowing companies to hire and consumers to buy up goods.

Recommended: Using Fundamental Analysis on Stocks

What Is the Crypto Fear and Greed Index?

While CNN publishes and maintains the traditional Fear and Greed Index, there are other websites that publish a similar index for the cryptocurrency markets.

The Crypto Fear and Greed Index operates in much the same way as CNN’s Index, but instead, focuses on sentiment within the crypto markets. The Crypto Fear and Greed Index is published and maintained by Alternative.me.

The Takeaway

The Fear and Greed Index is one of many gauges that tracks investor sentiment, and CNN’s Index focuses on seven specific indicators to measure whether the market is feeling “greedy” or “fearful.” While it’s only one indicator, in recent years, it has served as a somewhat accurate barometer of the markets, particularly regarding major events like elections and the pandemic.

But, as with anything, investors shouldn’t rely solely on the Fear and Greed Index to make decisions, though it can be used as one of many tools at their disposal. As always, it’s best to check with a financial professional if you have questions.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

FAQ

Is the Fear and Greed Index a good indicator?

It can be a “good” indicator in the sense that it can be helpful when used in conjunction with other indicators to make investing decisions. That said, it shouldn’t be the only indicator investors use, and isn’t necessarily going to be accurate in helping determine what the market will do next.

Where can you find the Fear and Greed Index?

The Fear and Greed Index is published and maintained by CNN, and can be found on CNN’s website.

When does it make sense to buy, based on the Fear and Greed Index?

While you shouldn’t make investing decisions solely based on the Fear and Greed Index’s readings, generally speaking, the market is bullish when the Index produces a higher number (greed), and is bearish when numbers are lower (fear).

Photo credit: iStock/guvendemir