Money market funds at a glance
One of the most popular management of cash or financial tools in the market nowadays is the money market fund. You might have heard a lot of people saying a lot of good things about this kind of fund, it is still important that you do the research yourself and don’t just depend on the hearsays. With the new rules which took effect early of 2010; a change that had been voted for by the five higher SEC commissioners, a lot of provides have predicted a great loss on their part. The new policy is in a way abolishing the standard $1 cost per share.
Money market funds are invested in short-termed investments which usually reach their maturity in les than thirteen months. There is a seen reduced risk when you invest in such funds since the terms are shorter. As a matter of fact, the Security Exchange Commission says that the longer your money is loaned to somebody then the higher the chances that your money will be put at risk; that the borrow may not be able to give your money back. According to SEC, the money should only have a maximum of a ninety-day term. Three of the most common investments for marker funds are the short-termed corporate papers, certificate of Deposit and the US treasury issues.
MMF is still recommended by the SEC to investors who are looking for a decent investment which is rated low-risk. The investor can also have an easy access to his account and can be claimed in just few business days. You can write a check too when you want to take out money from your fund. With this liberty given to you, you should also know what are the restrictions and possible fees that may apply when taking out money from the fund.
Primarily, your investment is a security. The cost per share could be nailed to a dollar but there isn’t a guaranty to this. When the price per share goes down then your initial investment goes down as well or even lose everything. One thing you should keep reminding yourself is that your investment is not insured by the FDIC.
Another truth about money market funds is that rates vary so you don’t have any idea how much you would be gaining on the next coming months. Just few weeks ago, the US MMF Fund fell by $4.58 billion and some blame the new regulations while others think it is just the economic situation which mainly affected the loss.
