Other Financial Instruments
Money Market Mutual Fund (MMMF) is a type of mutual fund that invests in safe, liquid assets. They were developed as an alternative to bank savings and checking accounts, and they are less volatile than stocks and bonds but not quite as safe as cash. Some MMMF specialize in a specific type of asset that they invest in. Some examples include MMMF that only invest in Treasury securities, others in Treasury securities and securities from GSEs (government sponsored enterprises), and a last group invests in money market instruments that they deem the safest. They are considered a good place to park cash temporarily, but they realistically aren’t great long-term investments. MMMFs work like any mutual fund, and they are issued to investors in shares.
Pros and Cons of MMMFs
MMMFs are considered as low-risk and low-return investments, and they are considered attractive because of their high liquidity and no-strings-attached entry and exits. However, they are not covered by the FDIC’s deposit insurance, and they offer little capital appreciation. An active and more savvy investor who has the time and knowledge to consider their options and has a higher tolerance for risk may not choose an MMMF, but for those who are more inexperienced, it might be efficient to take this route and delegate the task to the fund operators.