A money market fund is a form of mutual fund that invests in short-term debt instruments such as cash and cash equivalent securities. These funds are commonly used as short-term investments before you’ve found a better way to put your money to work. This is an especially good choice right now, when investors are waiting for the markets to recover. Investors will withdraw money from money market funds and invest it in equity funds or other high-yielding investments until the Bull Run begins. Checkout their website for more info.
Certificates of deposits, commercial paper, US Treasury bonds, repurchase agreements, and other instruments fall into this category. Taxable and tax-free funds are the two types of mutual funds available. The taxable funds are taxed at maturity, while the tax-free money market funds are not.
At first sight, no one will prefer a taxable fund over a tax-free fund for obvious tax purposes, but the reality is that tax-free funds have lower yields than taxable funds. When comparing the two, it’s critical that investors turn the tax-free yield into a taxable yield equivalent.
Money market funds are mutual funds with a high level of stability, liquidity, and current income in the form of dividends. While they are the best mutual funds, they have never been insured by the government. Hundreds of millions of people have deposited trillions of dollars in these funds as a safe haven while they wait for better investment opportunities. Investors tend to transfer their savings to money market funds when the stock market worries them. These funds are not to be confused with bank money market accounts. They are insured and pay a variable interest rate to depositors based on the bank’s discretion. Money market funds pay market rates, or prevailing rates (short-term rates), less a small fee.