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Understand mutual funds related to money market

Whenever many people think of Mutual Funds, they think of the investment associated with it as an investment in shares. But in reality it is not so. A money market mutual fund is a type of fixed-income mutual fund that invests in debt instruments. Debt instrument is a type of fixed income instrument. A fixed income instrument is an investment that generates an amount of income for you over a specified period of time.

Money market instruments have a maturity period of less than one year. Money market instruments also include overnight securities. Overnight securities are investments that mature within a single night. Money market instruments also include other securities, such as tri-party repos, commercial papers, certificates of deposits, and many government Treasury bills and commercial papers issued by financial institutions.

Money market funds aim to invest in money market instruments, with the fund’s managers aiming to invest in instruments with a tenor of up to one year. Money market funds invest in instruments with maturity up to one year, so investors are required to keep their minimum investment period in these funds for at least one year.

Money market investment instruments have a much shorter maturity period and lower interest risk, which is why money market funds have higher yields than overnight funds. It is perfect for short term investment and it provides liquidity to the investors.

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Written by Ruksar

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