money market mutual fund

Understanding The Anatomy Of Money Market Mutual Funds

Looking for the investment in mutual funds which gives high safety and some returns as well? Then you should know how the money market mutual funds work. They are the most liquid form of the investment in the mutual fund universe.

What are money market mutual funds?

money market mutual fund

Source : pacassetmanagement.com

Money market mutual funds are the funds which are in highly liquid form and the investment in these mutual funds are done in the ultra-safe instruments and bills such as treasury bills, commercial papers, etc. which are having less lock in period and also the money can be withdrawn at any time of any emergency and it can be used as a plan to use money after 2-3 months. Many of the analysts when it comes to calculate ratios treat money market mutual funds as a cash balance only because of its high liquidity. These money market mutual funds are developed for the small investors and work same as the equity and the fixed income bearing mutual funds. If being chosen wisely the tax exempt money market mutual funds can also get us the tax benefits as well as grows our wealth also.

Money market mutual funds in which one should invest

Debt funds:

money market mutual fund

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Debt funds will lead the investor towards the low risk investment and the income earned will be in the form of the interest, thus the investor will get regular income without the risk and also the capital appreciation is benefit.

Gilt funds:

money market mutual fund

Source : finedge.in

In this type of the investment the money is invested in the government bonds and securities. So we can say that there is no risk in investment in gilt funds.

Fixed maturity plans:

money market mutual fund

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These types of the plans are having the maturity period of one month to five years. If you want to invest for the fixed period of time then this type of the investment in plans is very much helpful.

Important factors to invest in the money market mutual funds

Analyzing Record:

money market mutual fund

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The record of the money market mutual funds in which we are interested to invest shall be fully analyzed and also the record shall be tracked over a period of time after the investment is made.

Analyzing returns:

money market mutual fund

Sourcecartivity.com

At the time when investment is made one should see that what the returns are provided by the money market mutual funds as it is necessary to track the returns. One should always see whether it provides the returns more than the banks provide.

Maturity period:

money market mutual fund

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One should always analyze the profile when the maturity of the fund is due as it helps in deciding the rate of the returns by analyzing holding period of the money market mutual funds.

Investment profile:

money market mutual fund

Source : eimf.eu

One should always see to it that where the money is invested which are provided by him. It is helpful in analyzing the risk factor as well as the returns of the investment. Understanding this will lead us to the better portfolio management.

Financial planning:

money market mutual fund

Source : fpgindia.org

If the person wants to pay regular sum of money and also wants to invest the extra funds which are there with him, then he should invest in the money market mutual funds.

Also the investor shall see to it that he gets the benefits in the tax also and shall choose wisely the funds which provide the savings in the tax liability.