Money Market Mutual Funds Offer Liquidity And Higher Yields

2007-03-08 10:33:40

( Financial )



You may have extra funds that you’d like to invest in fixed-income securities for your emergency and short-term needs. Money market mutual funds could be the right investment for you. Money market funds are liquid and generally safe investments that provide alternative parking places for your cash and offer lower risk than investing in stocks and bonds.

Money market mutual funds can be purchased in banks, brokers and investment companies. Investment companies offer the majority of the money market mutual funds like vanguard money market funds and fidelity money market funds. These companies pool investors’ money and invest in short-term securities which include government agency obligations, treasury bills, certificates of deposits and commercial paper.

When you invest in money market mutual funds, you take advantage of higher interest rates than bank savings accounts. You will also find that it’s easy to get your money from money market funds as most funds provide check writing privileges.

You should note, however, that even if you invest in top money market funds there is a chance of losing your investment since money market mutual funds are not guaranteed like bank savings accounts. If you are not a risk taker, you may opt to invest in other instruments which the government insures.

But if you still find money market mutual funds attractive, you may buy the best money market funds from any of the large mutual companies. Larger mutual firms have the financial capabilities to make up for shortfalls just to ensure that you get at least the break-even on your investments.

To lessen the risk on losing in money market mutual funds, you should read the prospectus before you give your money. The prospectus provides the lists of the securities that money market mutual funds invest in. By doing so, you can evaluate the risk of default in your investments.


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