Understanding Money Market Mutual Funds

The money market originated as a means to support the short-term borrowing needs of businesses. Loans could last from twenty-four hours to more than one year. Interest rates for these loans are influenced by 1) supply and demand, 2) the duration of the loan, and 3) the company's credit history. There is so much money in money market mutual funds, which becomes a positive aspect for the individual investor.

Money market mutual funds, which are completely liquid and readily accessible, consist of contributions from investors and produce short-term rates. You can buy into most of these funds with a minimum amount of $500. Finally, it is important to note that money market mutual funds are neither guaranteed nor insured, and a financial gain is not always the result of your investment.

Withdrawal is generally not limited to a specific date or time period. However some funds may have a transaction limit within a specific time frame. In addition, money market mutual funds incorporate check-writing capabilities so that it is easy to obtain funds when a transfer is needed to cover a shortfall.

Please ensure that you diligently read the prospectus, which accompanies mutual funds. This gives you a clear idea of the factors (objectives, expenses, and risks) involved with the funds themselves. A financial professional may better explain the details.

This information is presented to educate the reader and does not constitute professional tax and legal advice.

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