What are Money Market Funds?
Money market funds are those which have short term maturities, mostly within a year. They can be purchased through mutual funds, banks or brokerage houses.
Money market funds consist of liquid funds of high quality.
Examples of Money Market Funds : Government Securities, Treasury Bills, Bonds, Debentures
Features of Money Market Fund
- They are of low risk, but also as expected the returns are low as well.
- No entry or exit fee associated with them
- Some offers tax benefits as well, so it is a lucrative option when one needs to invest his money for a short duration and the main motive is capital preservation.
- The returns are linked to the market conditions.
Advantages of investing in money markets
- The minimum amount of investment is low
- The funds are very liquid
- The default risk is very low
Money market fund vs Money market accounts
- Money market funds provide wider variety than money market accounts
- The yield for Money market funds are generally higher.
- Money market accounts are a bit safer than Money market funds
Every product comes with its own set of advantages and disadvantages, the decision lies on the investor based on his needs and risk appetite. A clear understanding of various products and prudent analysis of one’s financial gains is what helps in the long run.
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