Definition of Money market Fund
Money market Fund is a type of mutual fund which is normally short term in nature and are open ended. They are normally considered safe in nature while being high yielded. It’s main purpose is to earn profit for investors while keeping the per of share as low as $ 1.
These are short term investments with one year or even less maturity time.
They are highly liquid in nature.
Brief Explanation of Money market Fund
They are fixed income funds that are invested in securities and Government treasures like debt.
ADVANTAGES :
- These funds can be easily converted into cash i.e. they are highly liquid.
- They are less risky in nature.
- They are high yielding funds with high rate of interest.
- They can easily be accessed, purchased and sold.
DISADVANTAGES :
- If interest rate received is lower than the inflation rate, then the purchasing power of the investor is declining.
- If the interest is already low, then in that case any type of cost or fee associated can bring the profit to negative value.
- Minimum account is mandatorily required to be kept in the funds account.
- Limited number of withdrawals and transfers are allowed by the banking regulations.
Investors with following aim usually invest in money market funds
- Short term goal to earn money
- Have low tolerance to risk
- want the investment to be highly liquid
- have less capital but still want to invest
