Investing in a Money Market Fund

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Investing in a money market fund A money market fund represents an institution that sets out to collect financial resources from investors and create gains from interest for the same investors. In a different formulation: The money market fund represents "an investment fund that holds the objective to earn interest for shareholders while maintaining a net asset value of $1 per share. Mutual funds, brokerage firms and banks offer these funds" (Investopedia, 2012). The most important characteristic of the money market fund is that it presents investors with safe investments, but which generate low levels of gains. The investments are often placed for the duration of one year and they are as such easily accessible to the investors. Specifically, while investors do not face major risks of losing their initial investment, they would neither register increased gains, but the money is often easily accessible to them. The fact that the money market fund retrieves low levels of gains on the investment is often a reason determining investors not to place money in them. Still, money market funds are still popular as they guarantee a return, and they are also popular as a source of generating rapid gains and securing the investment. This virtually makes them suitable short term investments, but not profitable long term investments. "A money market fund's purpose is to provide investors with a safe place to invest easily accessible cash-equivalent assets characterized as
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