Money Market Fund
Money Market Fund
A Money Market Fund is a type of mutual fund that invests in short-term, high-quality debt instruments, such as Treasury bills, commercial paper, and certificates of deposit. These funds aim to provide investors with high Liquidity and a stable net Asset value (NAV), typically set at $1 per Share, making them a popular choice for individuals seeking to park cash safely while earning a small return.
Examples
- Government Money Market Funds: These funds primarily invest in government Securities and are considered low-risk. For instance, the Vanguard Federal Money Market Fund invests in U.S. Treasury bills.
- Prime Money Market Funds: These funds invest in a broader range of short-term debt Securities, including corporate Bonds. An example is the Fidelity Prime Money Market Fund.
- Tax-Exempt Money Market Funds: These funds invest in municipal Securities and offer tax-exempt income. An example is the T. Rowe Price Tax-Exempt Money Fund.
Use Cases
Investors often use Money market funds for:
- Short-Term Savings: Individuals looking to save for short-term goals while earning a modest return.
- Emergency Funds: Providing Liquidity in case of unforeseen expenses.
- Cash Management: Businesses may use Money market funds for managing their cash reserves efficiently.