A mutual fund is typically fashioned by an investment firm. The whole thing is publicized and the share holders are then encouraged to put their money in this mutual fund.

Invest Less, Earn Maximum Returns! Try Money Market Mutual Funds

Mutual funds are perceived to be relatively risk free investment options in comparison to stocks and other securities. Individual stocks and securities fluctuate both in volumes of trade and prices as do treasury bills (T-bills) and certificates of deposits (CDs). This article informs you:
  • How money market mutual funds differ from other mutual funds?
  • What are the tips that help you in succeeding in money market mutual funds?
  • What are the features of money market mutual funds?
Mutual funds are perceived to be relatively risk free investment options in comparison to stocks and other securities. Individual stocks and securities fluctuate both in volumes of trade and prices as do treasury bills (T-bills) and certificates of deposits (CDs). Though T-bills and CDs provide a steady return on investment they are not affordable by retail individual investors for they require an initial outlay of huge sums of money. So, mutual funds which invest in debt instruments of short term with the sole objective of earning interest for their shareholders are called as money market mutual funds. Money market funds strive to maintain a net asset value of at least $1.00.

Usually mutual funds dealing in money market instruments sell for low minimum initially thus enticing retail investors while they generally are sold on no load. Any one wanting to invest in money market mutual funds is needed to have at least a rudimentary knowledge of instruments such as above that form the bulk of money market.

Broadly there are two types of money market funds. The first one is for the institutional investors and the second one is for retail investors.

Institutional Money Market Mutual Funds

Institutional money funds are basically held by governments, institutional investors and businesses etc. They sell in bulk and large sums of money are parked in institutional money funds. The largest institutional money market mutual fund, AIM money market fund has invested $31 billion in US treasury bills and corporate debts.

Retail Money Market Mutual Funds

Retail money market funds are more often than not used for parking money temporarily such as at stock brokers' firms. The size of the retail money market funds is nearly half of all the money funds. The usual retail money fund investment portfolio is commercial papers and US T-Bills like short term debts and with some focused funds such as tax free funds, government only funds and non government mutual funds. The advantages with retail money market funds are you can withdraw money even in smaller denominations like $ 500 by drawing a check like you do with your bank account. You also have the option of a very simplified redemption to exercise.

What Is So Special About Money Market Funds?

The volume of money market instruments subscribed and sold to shareholders indicates the popularity of these products. But really there is more than meets the eye with money market funds. However, it is the three basics qualities good investment that is making these funds special.
  • Safety - Money market funds carry the lowest risk the retail low income investor can ask for. More over the assets are by and large invested in safe and stable instruments of investment issued by governments, banks and corporations etc.
  • Unlike the money market instruments which call for huge investment, money funds do not always require you to put in copious amounts of money for purchases facilitating large number of investors to benefit from the price advantage. You can start investing from $ 500 to $ 5,000 while direct investment in money market instruments would cost you a minimum of $ 5,000.
  • Fixed net asset value - The money funds offer immediate settlement like the normal instruments of money market and grossly unlike most mutual funds which have T3 (three days after the transaction) settlement. The NAVs are fixed at $ 1.00.
Continue to: Tips to Buying Money Market Mutual Funds

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