Exploring Money Market Funds | A Wise Investment Choice

Exploring Money Market Funds | A Wise Investment Choice.Money market funds are a type of debt mutual fund that invests in highly liquid money market instruments.

Exploring Money Market Funds | A Wise Investment Choice

These funds aim to deliver returns that typically surpass those of term deposits. They are particularly attractive to investors seeking fixed returns within a short timeframe, typically ranging from three months to one year. Notably, these funds do not incur losses for investors who stay invested for longer than six months, making them a compelling choice for those seeking higher returns than traditional term deposits.

Popular Money Market Funds

As of July 31, there are 23 money market funds with a combined total assets under management (AUMs) of ₹1,49,582 crore. Some of the popular money market funds in this category include

Understanding Money Market Instruments

Money market instruments are the key assets in which money market funds invest. These instruments are traded in the money market, a marketplace for cash and cash equivalents. Some common money market instruments include:

1. Certificates of Deposit: These are similar to term deposits but lack the option of early redemption. They can be negotiated directly between parties.
2. Treasury Bills: Issued by the government to raise funds for up to one year, these bills come with a sovereign guarantee, making them a safe investment choice with lower returns.
3. Commercial Paper: Short-term unsecured promissory notes issued by organizations with high credit ratings. They are issued at a discount and redeemed at face value.
4. Repurchase Agreements: These agreements involve temporary lending of securities between Reserve Banks and commercial banks or between two banks. The borrower buys back the securities at a predetermined price.

Investing in Money Market Funds

A Wise Decision Money market funds offer an attractive investment option for those seeking fixed returns over a short period. With a variety of popular funds available and a range of money market instruments in which they invest, investors have the opportunity to earn better returns than traditional term deposits. Consider exploring these funds for a potentially rewarding investment experience.