| Money market funds are one of the most popular | | | | securities they buy. However, the most significant |
| cash management tools. These investments are | | | | distinction is whether the dividends earned are |
| also touted as the safest type of mutual fund. | | | | taxable or tax-free. |
| But before investing in them, you should first | | | | The Advantages of Money Market Funds |
| know what they are, their benefits, and if they | | | | With this type of investment, you are allowed to |
| are suitable investments for you. | | | | write checks that draw from a money market |
| What Money Market Funds Are | | | | fund. This allows you to enjoy the benefits of |
| Money market funds are mutual funds that invest | | | | dividend earnings, plus you can easily access your |
| in money or financial markets, which, in simple | | | | cash. However, you need to verify with your |
| terms, means that you borrow or loan money, | | | | institution first regarding restrictions and fees. |
| respectively. A money market fund is similar to | | | | Money market funds are most practical for |
| your deposit account at the bank in that it takes | | | | parking cash you need in the short term. These |
| your money and uses it for investment purposes. | | | | needs may include down payment for a house, a |
| Then, a portion of the earnings, which come in | | | | car or a vacation. Also, since money market |
| the form of dividends, are paid to you. In general, | | | | funds are completely liquid, you can sell your |
| money market funds pay out monthly dividends. | | | | shares in a money fund anytime you want to. |
| Money market funds typically invest in short term | | | | Who Invests in Money Market Funds |
| investments that mature in less than 13 months | | | | Money market funds are for investors who want |
| at the maximum. Since money market funds are | | | | to earn decent returns from safe investments. |
| investment with shorter time frame, the risk is | | | | These investments are usually liquid. This means |
| significantly reduced. The idea is that lending the | | | | that you have the privilege of drawing out the |
| money for the short term is safer as there is a | | | | money within a few business days if you need to. |
| high probability that the amount will be paid back. | | | | Money market funds also allow you to take |
| Normally, money market funds invest in US | | | | advantage of increasing interest rates. This is |
| Treasury issues, short-term corporate paper, and | | | | made possible by stashing your money in an |
| certificates of deposit. There are different kinds | | | | investment that adjusts with the movements of |
| of money market funds based on the type of | | | | the market. |