What Are Money Market Funds?

Now that you know what are mutual funds and you have spent some time looking into their different options, it is time to introduce you to one in a different line of mutual funds, the money market funds.

What are Money Market Funds?

In the brave new world of finance money market funds are the term that is used for people investing in short term lending and borrowing. They are generally determined to befunds that invest a majority (at least 95%) of the money they have in 'near cash' and 'short term cash' investments. The idea is that by investing in short term near cash and shorter cash investments, the amount of risk that the members are exposed to becomes minimal, compared with investing in long term high risk ventures.

Are There Risks With Money Market Funds?

As with any form of investment there is always a minimal risk. However, since the financial occurrences of late 2008, the United States Government has offered insurance on publicly offered money market funds. The money market fund must pay a fee to be involved in this program, so it is a good idea to ask the money market fund that you are looking into whether they are part of this plan. If you are worried about the risks it is a good idea to only become involved with those offering money market funds with the United States Government Insurance policy.

Which Money Market Funds are for Me?

Making a decision about what mutual funds you should be involved in is a very personal decision, just as deciding what are mutual funds you should be involved in. The first thing you should do is to become as educated as you possibly can about money market funds. There is lots of free information on the internet and there are also a lot of very good courses - both online and offline - that can teach you the things you need to know to make a wise investment. It is important to understand how a money market funds works even if you are planning on operating though a broker. Having an understanding of how it works and knowing the vocabulary that goes with mutual funds investing means that you are more likely to be able to 'hold your own' and are less likely to get ripped off by unscrupulous investors! Once you have a good general knowledge of what are mutual funds and how money market funds work, your next step should be to look at a number of different money market funds and do a comparison. In the comparison you should look at how the money market fund has performed over the last 5 years, what it typically invests in in regards to industry and things like the money market fund companies history and whether they are involved in the United States Government insurance scheme. There are other things that you might also find personally important, like the kinds of investments the firm makes and whether they are socially and / or environmentally sound.

Money market funds can be a great way to invest your money with minimal risk, especially given the new United States Government insurance scheme. If you are looking for a fairly safe way to invest in the market which does not require a long term investment or a great deal of specialist knowledge then money market funds may be a great option for you. Just ensure that you do all of the research and learn everything that you need to to make sure that the investment is as sound and as safe as you would like it to be. As far as short term outlook investments go, money market funds are certainly considered to be one of the more lucrative - while still being safe - options that are available to you.