Features of Money Market Funds
To provide clarity here are the characteristics of Money Market Funds:
1. Short-Term Investments: MMFs strategically focus on securities with short maturities, ranging from days to a year. This intentional approach minimises exposure to market fluctuations, aligning with the fund’s primary objective of providing a secure space for surplus funds. The emphasis on short-term investments enhances the stability of the fund.
2. Liquidity: Designed to be highly liquid, MMFs ensure that investors can easily buy or sell shares on any business day. This liquidity feature guarantees quick access to funds when needed, making them an attractive option for those valuing liquidity in their investment portfolio. The ability to access funds promptly adds to the practicality of MMFs.
3. Diversification: MMFs maintain diversified portfolios across various money market instruments. This deliberate diversification is aimed at spreading risks and minimising the impact of defaults by any single security. Diversification enhances the overall stability of the fund and safeguards investors from concentrated risks.
4. Stable Net Asset Value (NAV): The fundamental goal of MMFs is to maintain a stable NAV of $1 per share. This stability provides investors with confidence that they can redeem their shares at any time for a consistent value, reinforcing the notion of the fund being a secure investment. The stable NAV is a key feature attracting risk-averse investors.
5. Low Risk Profile: MMFs prioritise investments in high-quality instruments such as Treasury bills and government agency securities. This intentional focus on safety reduces the likelihood of incurring losses on invested capital, contributing to the overall low-risk profile of MMFs.
Contact Us