Introduction
The money market mutual funds are a multibillion-dollar form of investment. Many corporations, pension funds and people utilize them as their primary source of liquidity because they really are both liquid and safe. Of course, this only adds to their appeal. There are many various types of money market mutual funds that make it somewhat difficult to understand money market rates without doing some research first.
The 1940 Investment Company Act regulates money market mutual funds. These are then managed by various mutual fund companies that will charge their customers a small fee for this service, which includes creating and running a security's portfolio for them. Specifically, these money market mutual funds are the cash equivalent of buying short-term (required in order to provide daily liquidity) safe securities, which include commercial paper, treasury debt, agency debt and repurchase agreements.
Types
There are 5 types of money market mutual funds, all of which have varying money market rates. These include:
- Prime Investments
- Government Investments
- Treasury Funds and Repurchase Agreements
- Tax-free Investments
- Off-shore Investments
The most important decision you have to make is which money-market mutual funds to invest in. There are distinct money market rates because many investors have better information than others. Nevertheless, you can rest assured that you’ll get the best money market rates by sticking with well-known companies (i.e. Fidelity, Vanguard, Goldman Sachs) since they aren’t quite as risky.
Rates
Since money-market mutual funds invest in short-term liquid investments whose yields change daily the money market rates also change every day. For this reason, you can’t simply invest in money-market mutual funds and then forget about them. You need to monitor their money market rates closely in order to be able to move your funds at the right time and capture additional yield. The best money market rates are available institutional investors because they have large amounts of money to spend.
Today, money-market mutual funds are yielding money market rates of 45 basis points. Anyhow, most investors only get between 20 to 30 basis points. It is important to understand that this is different from a Money-Market account though because banks are required to pay higher rates today in order to attract your deposit. Whenever interest rates rise they don’t go up much, whereas money-market mutual funds will move in tandem with them.
Conclusion
Money-market mutual funds and accounts are important whenever you’re trying to manage your finances and keep your investment's liquid. They are a very safe way in which to move your money around in today’s economy. The best way in which to funnel money into money-market mutual funds is from money-market accounts. Whenever you’re ready to get involved with them, make sure that you research money-market mutual funds carefully. This is something that can be done online. You’ll want to take a look at what fees are charged and what options are available to you. In the end, this will help you to garner the best money market rates.
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