Although money market funds and money market accounts, a form of savings account offered by banks, have similar names, they are not the same. Furthermore, you probably don’t know anything about them or how to invest in them if you haven’t done any study on them. I wanted to go over the fundamentals of money market funds in this post, including what they are, how to invest in them, their benefits and drawbacks, and much more.

A money market mutual fund: what is it?

Investments in liquid, short-term securities, such as cash, certificates of deposit (CDs), treasuries, government repurchase agreements, high-quality debt, and other cash-like equivalents, are made by money market mutual funds. Their investment objectives are to maintain capital (meet or exceed rates of inflation), provide high liquidity, and provide investors minimal risk.

Pros of Money Market Funds

• High liquidity: Unlike CDs, for instance, there are no long-term obligations. Additionally, after selling a money market mutual fund, you can usually get your money back within a few business days.
• Extremely low risk: Returns that are typically higher than those of bank deposits provided by brokerage accounts, with simple in- and out-of-the-money transfers

Cons of Money Market Funds

• Capital growth is uncommon (occurs only when interest rates are higher than inflation).
• Return rates fluctuate with changes in interest rates and may even decrease as rates fall.

Where to Invest in Money Market Funds

Using an internet broker is the main method of investing in money market mutual funds.

How to Purchase Mutual Funds

Typically, purchasing shares of a money market fund requires the following actions:

• In case you don’t already have one, open a brokerage account.
• To transfer money to your brokerage account, link a bank account that you wish to use.
• Select the mutual fund option within the account, then input the desired rupee amount.

Money Market Fund Substitutes

Several well-liked substitutes for money market mutual funds include:

• Money market accounts: Offered by banks and credit unions such as JS Bank, usually have slightly lower rates than money market funds. They have less liquidity as well.
• Banks and credit unions: They provide high-yield savings accounts, which often feature rates that are marginally lower than money market funds with maximum amounts available for higher yields.
• Bonds: Issued by the Pakistan Treasury, these bonds have inflation-linked yields, early withdrawal fees, and a minimum one-year holding requirement. supported by the Pakistani government.
• Brokered CDs: Guaranteed rates and term-length, high liquidity but sold at market rates.

Bottom Line: Why Invest in a Money Market Fund?

In summary, why make an investment in a money market fund? In conclusion, I believe it boils down to the fact that they are a very low risk, easily accessible, highly liquid (no predetermined term-length), and investment alternative that can be held with brokerage accounts.

If you need help in investing, JS Bank’s Money Market Funds (JSMMF) is the right place to go.

Like with any investment, it’s critical to comprehend the dangers before making one, so if you are unsure, do your homework and consult an expert.