What is a money market mutual fund? These types of mutual funds are not very complicated to understand, but you need to first know what a mutual fund is in order to understand.
What is a mutual fund? This is generally how it works: a bunch of people decided they want to invest their money without having to choose their own stocks and while still getting a diversified portfolio. They take their investment, any a varying amount from thousand dollars to $10,000. It could be anything that they have that they want to invest. They pool their money together.
Then, the fund manager takes the money that they have pulled together and invest for the. They buy a mix of stocks, bonds, and/or other investment types. Some may be all stocks, some may be all bonds, some maybe any kind of mix. The benefit is that you don't have to choose the investment but you can still get excellent diversification and hopefully an excellent return.
How are money market mutual funds different? A money market mutual fund isn't invested in short-term securities. Instead of investing in stocks and bonds that last more than six months, these will be invested in short-term securities such as treasury bills, certificates of deposit, etc.
They are short-term securities therefore they will have a lower rate of return. That is generally okay, because money market mutual funds are not normally used as main investments. While people have cash outside waiting to be invested they will put in a money market mutual fund so that it earns money even notes on best. It is always important to have a certain amount of money in liquid cash while investing to make sure that you have money available when you do see a great investment. Using a money market will allow your money to be liquid but still make more than if you put it in a savings account.
Learn more about money market mutual funds [ ]. Also learn about high yield money market mutual funds [ 2009/06/high-yield-money-market-mutual-funds/]. When you know more, you can start investing and making more money.
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