Money market funds and their significant roles in the US economy

Money market fundscan be described as types of joint funds that we invest in short term debt securities. These funds gather money from many investors, which in turn are invested in stocks, bonds, among other securities. In general there are two types of these investment funds, which are institutional money market funds as well retail market funds, Institutional funds are owned by large firms, while retail funds are owned by individuals. These funds frequently give shares that are exchangeable, which investors buy directly, or through a broker.

Investors have many reasons that make them prefer to invest in money market funds, some use these funds as a safe haven to earn dividends, which will benefit them in the long run, since mutual funds tend to be very competitive with other types of savings accounts. Shares derived from mutual funds, can be traded in the stock market, at any given time. Hence because of this reason, for many institutions, such as, financial institutions and government agencies, these types of funds are the most preferred way of supervising money and other profits incurred within their institutions.

The kind of investments made on money market funds

In the United States of America, money market fundscan either be taxed or exempted from taxes depending on the kind of securities that they invest in. The funds that are not taxed are those that are invested in securities allotted by the state and local governments as well as the agencies and authorities. Funds which are taxable on the other hand, are invested in mechanisms like, US treasury bills, federal agency notes, certificate of deposits among others.

How the US economy benefits from these funds

In the US government, these investment funds are generally essential in providing salaries and inventories for those that are working. Thus they are very important as they finance employment as well as provide it for the citizens. These funds have also benefited the communities in a great way since tax exempted funds are used to finance public projects such as developing roads and bridges as well as providing water and sewerage treatment facilities. These funds also benefit the citizens by owning large amounts of commercial paper which in turn help to finance, credit cards, Auto loans and home equity. These mutual funds also help by financing the US government because one out of every eight dollars in short term paper is owned by these investment funds.