Choose money market funds for Risk Free Smart Investment

Stability is an important factor in today’s economy, considering the risks of economic downturn. Investing your money intelligently is the key to making most of your savings, and getting investment returns. There are numerous ways in which you can invest your savings these days, be it saving in bank, or buying a property. 

Risk free investment is the one that can give you most returns for your savings. Mutual funds are just one way of doing it, but another effective way that eliminates even the risks present in mutual funds is money market funds. Investing your money in this is very similar to investing it in mutual funds. The difference being, money market funds use only short term funds like debt funds, government security funds, and similar such money based funds for investing. These are considered low risk investment because of two reasons: First one being, they are by law required to use only low risk, high yielding short term investments, and secondly, they have a high liquidity. The investments can be government debt funds, or government security funds, which are extremely bankable, or it can be a high profile company paper, which also has minimum investment risks. 

Money market funds have a very high liquidity, which means, you can en-cash your investment at any given point of time. This also makes them very desirable, since there are no penalties attached to withdraw it like in certificate of deposit. When you are uncertain about the current market, and do not know when you will need to take your investment out, money market fund is a safer option. The interest rate will be fixed on a short term basis, so even though you may not make big profit out of it, money market funds assure you returns. 

There are different types of money market funds to choose from, so consider each one of them before you decide to invest your money. The lowest risks of all of them are in government treasury funds. These guarantee a profit irrespective of market fluctuations. These invest money only in treasury bills and government treasury bonds. Other common money market funds include prime funds, tax free funds and first tier funds. One caveat you have to be aware of, before making an investment is that, money market funds are not insured investments. While this may increase the risk factor potentially, it is worth taking chances since it is almost always a safe investment.