| Investing is an art. Investing in such a way as to | | | | have high liquidity. These funds aim to keep the |
| not lose money is a talent worth cherishing. Not all | | | | Net Asset Value (NAV), which is the value that |
| are blessed with such a talent. However, it is | | | | you get when you sell one unit of the fund, to be |
| quintessential (at least in recent times) to invest | | | | constant. However, the yield will move up and |
| your money so that you participate in your | | | | down. |
| economy's growth (and contribute something to | | | | What else do you get? |
| it). | | | | Money market funds are extremely liquid. They |
| So how do you invest your money so that you | | | | can be easily converted to cash. Its just like a |
| don't lose anything whatever be the market | | | | deposit in a bank. To make it look just like that, |
| condition? One way is to invest in mutual funds. | | | | most money-market funds have allowed |
| Investing in mutual funds provides safety and | | | | check-writing facility. You can write a check on |
| assures return. And amongst the mutual funds, it | | | | your money-market fund and just pay for |
| is always better to go for money market funds. | | | | whatever you want. Hence they are a serious |
| There has hardly been an investor who has lost | | | | competition to the banks! |
| money in these funds! | | | | Types of money-market funds |
| What is a Money-market fund? | | | | There are many different types of |
| A money market fund is a type of mutual fund | | | | money-market funds. One of the most common |
| that is required by law to invest in low-risk | | | | type is the Treasury-only funds. These funds |
| securities. These funds have relatively low risks | | | | invest only in the government treasury bills and |
| compared to other mutual funds and pay | | | | treasury bonds. This is the safest kind of fund. |
| dividends that generally reflect short-term interest | | | | Another popular type is the Government-only |
| rates. However, unlike a "money market deposit | | | | funds. These funds invest in all forms of |
| account" at a bank, money market funds are not | | | | government securities including debt from |
| insured federally. | | | | government agencies. Apart from these there |
| Money market funds are regulated primarily under | | | | are many funds like prime funds, first-tier funds |
| the Investment Company Act of 1940 and the | | | | etc. Whatever may be the name, all these funds |
| rules adopted under that Act, particularly Rule | | | | are of high quality and will promise to keep their |
| 2a-7 under the Act. | | | | NAV fixed regardless of what happens to any |
| How do these funds give you money? | | | | market in the economy. |
| The portfolio of these funds generally consists of | | | | One thing you must do before investing in a |
| government securities, commercial papers of | | | | money-market fund is to carefully read all of the |
| highly rated companies, certificates of deposits | | | | fund's available information, including its prospectus, |
| and other low-risk securities in the money market. | | | | or profile if the fund has one, and its most recent |
| These funds generally invest in securities that | | | | shareholder report. This is just to be safe. |