subject: Why Choose Money Market Funds? [print this page] So you're considering money market funds as part of your investment portfolio? While the potentially higher gains you can get (and the relatively low risk you undertake) can bode well for the diversification of your portfolio and the buffering of your assets against devaluation and inflation, there are a few other advantages that come with this type of investment:
These funds are popular because they're comparatively safe in comparison to other high-yield investments. The instruments or securities your money is invested in are typically quite stable, and come with short maturity periods and fixed income. The lower risk involved with these investments are in no small part due to who provides them - securities come from reliable and highly stable providers such as banks, big companies, and the government.
Investing in money funds also requires a lower initial investment compared to other tools that yield decent gains. Securities for the money market are generally expensive, with only a small percentage of investors being able to afford these. Money funds aren't the same - these usually tend towards lower requirements than mutual funds, thus resulting in easier investing. Due to this, people can put in relatively small amounts in a safer and more secure environment.
Money funds are also highly flexible, allowing the investor to buy, hold, or sell shares whenever he or she wishes. There aren't any market restrictions when it comes to the timing of what you do with what you own. You'll also be able to use these funds for checks, which can pay the day you write them. Mutual funds, for example, can take three days before payment, making money market funds a better option.
Picking out great money market funds can be difficult. You might go for funds that have significantly higher yields than the one you're considering, only to be floored by the possible losses that could come with greater risk. It's best to get expert advice, such as that an investment planner or financial advisor can give, prior to choosing the right money fund for your portfolio.
