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A money market mutual fund's purpose is to provide investors with a safe place to invest easily accessible cash-equivalent assets characterized as a low-risk, low-return investment. Because of their relatively low returns, investors, such as those participating in employer-sponsored retirement plans, might not want to use money market funds as a long-term investment option.
Money market mutual funds are designed to make the investor's job easier. One of the particularly good features about these types of funds is that they are uniquely liquid, especially in comparison to other types of funds on the market. There are several situations in which these funds make a fantastic opportunity to use them. While you should have the advice of your stockbroker, you may see them using these funds for a number of reasons, including these.
This often includes commercial paper, certificates of deposits, bankers acceptances, and Treasury bills. Most of the money market mutual funds available today are made up of these types of funds. The key is to understand what they are and what they can do for you.
One reason that money market mutual funds are used is to park funds, including cash reserves, when you are not yet ready to put the money into another investment. In addition to this, they work very well as a place to position money when you know you will need a cash outlay for anon investment purpose in the short term. The benefit here is that the accounts are liquid: you can convert them into cash in hand rather quickly in comparison to other types of investments. Additionally, they are very safe, which helps you to keep those funds safe, but still earning money for you, while you determine the best next step. You can have the amount of money you need at the very instant that you need it.
Another reason why people use money market mutual funds is to move money from one fund to the next. For example, perhaps you have a good assortment of mutual funds from one single fund...