» Dictionary of Mutual Fund Terms » Money Market Mutual Funds

Money Market Mutual Funds

Money market funds' existence dates back from the 1970s. They enjoy great popularity due to the low degree of risk and good short term returns.

This type of mutual funds buys short-term debt securities of different entities. This means that they invest in debt securities that last for less than a year and are securities of different US government agencies, banks, corporations and US Treasury Bills. Even though they have a fixed price of $1 per share, their yield fluctuates.

One of the banks' financial nightmares is the 1000-plus money market funds, which surpass the banks' products due to the following advantages:

  • Higher security

    Money market funds are characterized by a low degree of risk, which is due to the very secure investments they hold such as the t-bills. Investors do not have to worry about losing the invested assets since the government enjoys the opportunity to raise taxes whenever it feels the need to pay back its obligations. Additionally, a type of insurance is offered by a big portion of the companies that provide the investment in such funds, making your investment even more secured and risk free.

  • Higher liquidity

    Money market funds are famous for their high liquidity, which allows you to take money out of your fund account whenever you need them. Additionally, you can write checks, the payment on which again comes from your account. The withdrawal of money fortunately is not accompanied by any fees or penalties, which further contributes to the high popularity of money market funds.

  • Higher returns

    Money market funds are advantageous in this that they offer very returns on the investment ranging from 4% to 6%. It is obvious that they beat the banks' checking and saving accounts in this category too. Even though the interest is estimated every day, the payments are made at the end of every month. If you decide to leave the fund, the interest is right away.

  • Higher popularity

    Money market funds are widely used due to the low risk and high returns they offer. Additionally, your broker or mutual fund company will immediately move the acquired from a sold investment resources to a money market fund until you are ready to reinvest them. Furthermore, your capital is automatically transferred to a money market mutual fund whenever you create an account with a new broker or fund company until you are ready to make your investment.

As you can see, money market funds represent one of the smartest and profitable places where you can invest your money. There is no need to put them in a bank, since you will not get the same returns as the ones offered by money market funds. So, do not hesitate in your choice for place of investment, and choose money market funds.

Rate this article : Low
  • Currently 2.9/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5