Free Articles on Mutual Funds and many other topics
Another free Mutual Funds article for you by Dilip Mohan
Titled: MONEY MARKET FUNDS
MONEY MARKET FUNDS
Article Summary: Money market funds are mutual funds that invest in low-risk securities in the money market. They invest in short-term securities that have high liquidity. These funds maintain a constant Net Asset Value (NAV). Only their yields will vary. Since they are liquid, they also give check-writing facility to the investor.
Everyone should be able to find some way to invest their money in such a way that they do not lose it. Investing money ensures participation in the economic growth and also contributing to the economy. One of the best ways to invest without losing is to invest in mutual funds. It provides safety as well as assures return. Of these, the most liquid and safe investment is in money market funds. Hardly any investor loses money in these funds.
What is a Money-market fund?
A money market fund is a type of mutual fund that is required by law to invest in low-risk securities. These funds have relatively low risks compared to other mutual funds and pay dividends that generally reflect short-term interest rates. However, unlike a "money market deposit account" at a bank, money market funds are not insured federally.
Money market funds are regulated primarily under the Investment Company Act of 1940 and the rules adopted under that Act, particularly Rule 2a-7 under the Act.
How do these funds give you money?
The portfolio of these funds generally consists of government securities, commercial papers of highly rated companies, certificates of deposits and other low-risk securities in the money market. These funds generally invest in securities that have high liquidity. These funds aim to keep the Net Asset Value (NAV), which is the value that you get when you sell one unit of the fund, to be constant. However, the yield will move up and down.
What else do you get?
Money market funds are extremely liquid. They can be easily converted to cash. Its just like a deposit in a bank. To make it look just like that, most money-market funds have allowed check-writing facility. You can write a check on your money-market fund and just pay for whatever you want. Hence they are a serious competition to the banks!
Types of money-market funds
There are many different types of money-market funds. One of the most common type is the Treasury-only funds. These funds invest only in the government treasury bills and treasury bonds. This is the safest kind of fund. Another popular type is the Government-only funds. These funds invest in all forms of government securities including debt from government agencies. Apart from these there are many funds like prime funds, first-tier funds etc. Whatever may be the name, all these funds are of high quality and will promise to keep their NAV fixed regardless of what happens to any market in the economy.
One thing you must do before investing in a money-market fund is to carefully read all of the fund’s available information, including its prospectus, or profile if the fund has one, and its most recent shareholder report. This is just to be safe.
Article Source: http://www.upublish.info
About the Author:
Dilip Mohan
This is one area that you can look forward to invest. However there are many more alternatives to invest. To know about investing in mutual funds visit Investing in Mutual Funds and to get an idea as to how mutual funds work visit Mutual Funds.
**NOTE** - Dilip Mohan has claimed copyright on the article "MONEY MARKET FUNDS" ... if there is a dispute on the originality of this article ... please contact us via our Contact Form and supply our staff with the appropriate details of dispute.
