Welcome to Finance Resources

Money Market Fund

A money market fund, or a sometimes referred to as a money fund, is a mutual fund style investment in a variety of short-term debt instruments.  The money market fund was first established in the US Reserve Fund in 1971.  Since then growth has steadily occurred and today, over $2.3 trillion in assets are invested and spread over 2,000 money market funds.

Money market funds seek to limit exposure investors may face from losses stemming from credit, market, and liquidity risks.  The United States Securities and Exchange Commision regulates money market funds.  Most money market funds mainly invest in the highest rated debt, which matures within a year. According to the SEC, 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.  One drawback, however, is money market funds are not federally insured.

Typical investments of money market funds include:

• Government securities
• Certificates of deposits
• Commercial paper of companies
• Short-term bonds

These highly liquid, low-risk assets are the general stand-by of most money market fund investments.  The low-risk nature of these investments has landed them the term principal stability funds.  A money market fund seeks maintain a level of stability and hedge of most risk through low-risk investing.

Comment

Name

E-mail