The basic difference between mutual funds and money mutual funds is that mutual funds does investments in stocks, bonds and short term securities, while money market funds are ones in which specifically investment is done in short term securities. If you have any type of inquiries relating to where and just how to utilize unclebucks, you can call us at the web site. Thus money market funds are also one kind of mutual fund only.
So a money market fund is a kind of investment that buys short term debt obligations from the companies which have got high ratings and also from the government agencies which are completely dependable. Although these government organizations, offer a comparatively lower rate of return, but at the same time they ensure that the risk factor of losing the main amount is extremely low.
This indicates that money market mutual funds are many times used as a place for storing cash in times when it is not being utilized for more aggressive investments.
It is basically observed that money market mutual funds invest majorly in commercial paper, treasury bills. The rate of return is almost between two percent to five percent.
Also please note that money market mutual funds are investments termed as open ended. The meaning of the term open ended investment is that there is no penalty charged for the entry and exit of money.
There is a different kind of investment in each money market mutual fund, so that each money market fund comes with a different rate of interest.
It will be the investor�s decision to invest in the money market mutual fund, after he compares the different rates and considers the rates accordingly. Also please note that the rate of interest would be different at different times, and would necessarily not remain constant. More or less the interest rates would be moving in the same direction borrowing from your 401k the basic rate of the Federal Reserve Bank.
The main basic advantage of a money market account is that that these accounts typically pay interest rate at a higher end compared to the savings accounts. It is noted that they need an opening balance of higher amount than the amount required in the regular savings account.
The minimum amount required is $1000 to $2500. Also the price of the share is constantly kept at one dollar per share. Whatever interest is received on the money market mutual fund, it is mostly invested once again in the account and it depends on the investor whether he wants to withdraw or not.
However one needs to note down that though there is hardly any risk of money being lost in a money market mutual fund, still it is not completely and totally risk free. That means there are some chances that the money might get lost. Also sometimes the interest paid by these money market mutual funds could fall very drastically in the shortest span of time. Sometimes it does happen that the fall in the interest rate goes up to zero, so much that even the investor is not in a position to realize completely of the sudden changes. This clearly indicates that the investors should always watch the performance of the money market mutual fund and ensure that it is higher than the inflation rate.
So, we have discussed the advantages and disadvantages of money mutual funds as above.