A Guide to Money Market Mutual Funds

Money market mutual funds present investors with a viable way to get involved in the money market. This fund can provide a number of different benefits for the investors. Here are the basics of the money market mutual fund and how it could benefit you as an investor.

Money Market Mutual Funds

Money market mutual funds aim to provide a diversified portfolio of money market investments for shareholders. Although it sounds similar, it is not the same thing is a money market account. You are actually buying into a mutual fund with this type of investment. With a money market fund, the fund managers invest in things like Treasury bills, commercial paper, CDs, and repurchase agreements. These all represent short-term investments that bring in a regular return on your investment.

In Between Investments

The money market mutual fund can be a great place to park your unused cash when you do not necessarily have a purpose for it. Many investors seek to eliminate their holdings in one mutual fund but do not necessarily have an idea of where to invest it next. During that in-between period, the money market mutual fund could be the ideal solution. It gives investors a safe place to park their money and still earn some sort of return on it. This type of fund also ensures that you will have nearly immediate access to your funds when you need them. Other sorts of short-term investments, such as a CD, will not allow you to gain access to your funds until the maturation of the CD. This means that you could miss an opportunity to get involved in a good investment when it comes up. The money market mutual fund provides you with the ideal flexibility for this scenario.

Accessing the Funds

With a money market mutual fund, you will traditionally have very easy access to your funds. Most money market funds offer their investors checkbook access to their money. Therefore, if you need your money for anything, you can simply write a check for it and the money will be sent to the appropriate location. If you do not feel comfortable writing a check for the money, they can transfer the money to an account, or mail you a check for what you need. With check writing, there will often be a minimum disbursement, for example $500. Therefore, it prevents you from using it for everyday purchases, but it is still readily available to you.

Types of Money Market Mutual Funds

As an investor, you have several different types of money market mutual funds to choose from. One type of money market mutual fund only invests in U.S. Treasury securities. Another type of money market mutual fund likes to invest in Treasury securities and other government-backed enterprises.

The most common form of money market mutual fund invests in a combination of many different types of money market investments. This provides you with a very diversified portfolio from which you can benefit.

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