What is an investment account?

I was checking the balance on my little SIMPLE IRA this morning, and I noticed something that may help people studying for the Series 7. For some reason, the concept of "cash" in an investment account can be a little confusing, so let's end that confusion right now. Below, you can see the actual balances in my SIMPLE IRA account. What makes it a "SIMPLE IRA"? I simply follow the IRS rules for maximum annual contributions, I don't touch the money until I'm 59 1/2, and in exchange for that, I get to lower my tax burden now and let the money grow tax deferred until I finally take it out and pay my ordinary income rate on the withdrawals. That's between me and the IRS. Between me and TD Ameritrade, there is this investment account coded as a SIMPLE IRA, in which I deposit cash and then, at my leisure, buy securities. I make a monthly contribution of $875 into the SIMPLE IRA, which is why we see the first item "cash balance-$875." That check was just recently deposited, so it's sitting as "cash". It will soon be "swept" into the next item, "money market," where it will at least earn some interest while I wait to get up enough courage to buy more stock. The stock I've already purchased over the past few years is worth about $16,000 right now, bringing the total account value to about $28,000. Why am I so imprecise with the stock value and, therefore, the total account value? Because in the time it takes to type each sentence, the value of the stocks and, therefore, the total account changes. This is not a bank account, people.

Cash balance
$875.00

Money market ¹
$11,239.92

Long stock value
$16,039.69

Account value
$28,154.61

If I follow the footnotes, I see an excellent explanation by TD Ameritrade of what this "cash" and "money market" stuff is all about. Here is how they put it when explaining "money market":
This is the interest- or dividend-earning cash you hold in a sweep vehicle; this money can be withdrawn or used to buy securities. Your money market balance also includes accrued interest that will be paid at month-end.

SIPC covers a certain amount of "cash" in an investment account. Once the cash is "swept" into a money market reserve account, it's a security, and it earns a little bit of interest while the investor decides which stocks, bonds, or mutual funds to buy with it. I've certainly never sat around with such a huge cash percentage, but with home values still falling, and huge banks still teetering on bankruptcy, I'm just not willing to commit to any stocks or bonds just now. But, I can't sit on "cash" or "money market" securities forever--if I do that, I'll never build up a retirement nest egg. Through monthly deposits and--we hope--some capital appreciation, I hope to bring this account value up by a factor of 10. That might happen through some good bond investments, but I'm still betting on the need to buy stocks for the long haul. Luckily, while I wait for the economy to cooperate with my investment goals, I'm sitting on "cash" and "money market" balances that TD Ameritrade is responsible for.

As with most things related to the Series 7--this is not rocket science. It just takes some time to understand what's going on. Only at that point can you really do well on an exam question about SIPC or "cash" balances.