Money market is type of mutual fund. And that invest in money markets. But if you see that people buy and sell stocks in stock market. Therefore you can also see how people buy and sell money in money markets. It means that you borrow money respectively. For more information see on recent trends in money market fund assets. Hence, check weekly report on money market fund assets.
What is Money Market Mutual Fund
It is safe savings option compare to other mutual funds. However, even these funds are expose to fluctuate in interest rate. Therefore it is an open ended mutual fund. Probably, investment option for liquid funds includes Treasury Bills. In addition, like Commercial papers and Certificate of Deposit.
However, money market fund is alternate to bank savings. But they are not government insure. Therefore, this fund is safe as bank deposit and yields high income. And, objective of invest in such funds is to preserve principal amount.
In money market risk is involved. And concept of money market fund is older than stock exchanges. But it is historic type of mutual fund. Furthermore, financial structure of any economy is based on two types of market. Like Stock market and money market. Moreover, stock market is nothing but making investment in securities of various companies.
On other hand, Money market investment made in short term debt instrument. Moreover, these securities are highly liquid and provide safety of investment. Probably, money market mutual fund is also known as liquid mutual fund. Hence, for more information see what is money market
How Money Market Mutual fund works
Therefore working of money market fund is simple. Moreover, fund manager pools money from various investors. And invest either entire amount or partial amount in most beneficial instrument. But fund manager selects well performing and secured money market instruments.
But these instruments can be bought and sold in order to earn profit. And money market fund is safest form of mutual fund investment. You can earn consistent return on investment. Hence, these funds are unchanged by economic fluctuations.
Further, Money market MF is governed by United States Securities and Exchange Company Act. Hence, this regulation ensures protection of investment with limited risk. Hence, see importance of Money market mutual funds.
Features of Money market mutual fund
It is market for short term funds called near money. Therefore it deals with financial assets with maturity period up to one year only. Probably, it deals with only those assets which can be converted into cash. And it is not singly homogenous market. But these transactions are conduct without help of others.
However, in money market transaction cannot take place like stock exchange. And transaction takes place only through oral, documents and written communication. Similarly, diversified portfolio is required for money market investment. Because, it cannot have one type of holding that exceeds 5% value of fund.
Funds cannot be invested for period of 397 days. And, average maturity of portfolio is 90 days period only. Therefore, it is type of short term investment in mutual funds. You must hold at least 5% of total investment in short term categories of funds. Hence, component of money market are commercial banks, acceptance houses and NBFC.
Finally, see function of money market. Therefore check types of money market instruments. And also check difference between money market and capital market. Hence, check money market instruments. Moreover, to know more details Money market vs capital market