What Is A Money Market Fund: Understanding Investments And Benefits?

A money market fund is a type of mutual fund that invests in short-term, low-risk debt instruments, offering a blend of liquidity and modest returns. At WHAT.EDU.VN, we simplify complex financial topics, providing clear answers to your questions. Explore the stability, returns, and tax advantages of money market funds, and discover how they fit into your broader investment strategy with cash management and short-term investments.

1. What Is A Money Market Fund?

A money market fund is a type of mutual fund that invests in short-term debt securities, such as Treasury bills, commercial paper, and certificates of deposit. It aims to provide investors with a safe and liquid investment option, offering a modest return while preserving capital. These funds are considered low-risk investments, making them suitable for investors looking for stability.

Money market funds work by pooling money from multiple investors and investing it in a diversified portfolio of short-term debt instruments. The fund’s objective is to maintain a stable net asset value (NAV), typically around $1 per share, while generating income for investors. Understanding the components, goals, and benefits of these funds helps investors make informed decisions.

1.1. What are the Key Components of a Money Market Fund?

Money market funds primarily invest in high-quality, short-term debt instruments. These may include:

  • Treasury Bills: Short-term debt obligations issued by the U.S. government.
  • Commercial Paper: Unsecured promissory notes issued by corporations to finance short-term liabilities.
  • Certificates of Deposit (CDs): Time deposits offered by banks, providing a fixed interest rate for a specific period.
  • Repurchase Agreements (Repos): Short-term borrowing agreements where securities are sold with an agreement to repurchase them at a later date.

These components ensure that the fund maintains high liquidity and low risk.

1.2. What is the Primary Goal of a Money Market Fund?

The primary goal of a money market fund is to provide investors with a safe and liquid investment option that offers a modest return. Key objectives include:

  • Capital Preservation: Maintaining a stable net asset value (NAV), typically around $1 per share.
  • Liquidity: Allowing investors to easily buy and sell shares without significant penalties.
  • Income Generation: Providing a steady stream of income through interest earned on the fund’s investments.

These objectives make money market funds an attractive option for investors seeking stability and liquidity.

1.3. What are the Benefits of Investing in a Money Market Fund?

Investing in a money market fund offers several benefits, including:

  • Low Risk: Money market funds invest in high-quality, short-term debt instruments, reducing the risk of capital loss.
  • High Liquidity: Investors can easily access their funds without significant penalties, making it suitable for short-term investment needs.
  • Modest Returns: While returns are not as high as other investments, they are generally higher than traditional savings accounts.
  • Diversification: Money market funds offer diversification by investing in a variety of debt instruments, spreading risk across multiple issuers.

1.4. Are Money Market Funds Insured?

Money market funds are regulated by the Securities and Exchange Commission (SEC) but are not insured by the Federal Deposit Insurance Corporation (FDIC). Instead, they are typically insured by the Securities Investor Protection Corporation (SIPC). This provides protection in case the brokerage firm holding the funds fails. However, it does not protect against losses due to market fluctuations or poor investment decisions.

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2. How Do Money Market Funds Work?

Money market funds operate by pooling money from multiple investors to purchase short-term debt instruments. The fund’s managers actively manage the portfolio to maintain liquidity, minimize risk, and generate income. Understanding the mechanics of these funds can help investors appreciate their role in financial planning.

These funds work much like other mutual funds. They issue shares to investors and use the pooled money to invest in a portfolio of assets that meet specific criteria. Let’s take a look at how they function and how returns are generated.

2.1. What Types of Investments Do Money Market Funds Hold?

Money market funds primarily invest in short-term, high-quality debt instruments. These can include:

  • U.S. Treasury Securities: Debt instruments issued by the U.S. government.
  • Commercial Paper: Short-term, unsecured debt issued by corporations.
  • Repurchase Agreements (Repos): Agreements to sell and repurchase securities at a specified price and date.
  • Certificates of Deposit (CDs): Short-term deposits held in banks or other financial institutions.
  • Municipal Securities: Debt instruments issued by state and local governments.

These investments are chosen for their low risk and high liquidity, ensuring the fund can meet redemption requests.

2.2. How are Money Market Funds Managed?

Money market funds are managed by professional investment managers who focus on maintaining a stable net asset value (NAV) and generating income. Key management strategies include:

  • Credit Analysis: Assessing the creditworthiness of issuers to minimize default risk.
  • Maturity Management: Maintaining a short weighted average maturity (WAM) to ensure liquidity.
  • Yield Optimization: Seeking the highest possible yields while adhering to risk management guidelines.
  • Regulatory Compliance: Adhering to regulations set by the SEC to protect investors.

2.3. How Do Money Market Funds Generate Returns?

Money market funds generate returns through interest earned on the fund’s investments. The interest income is typically distributed to investors as dividends. The yield on a money market fund depends on prevailing interest rates and the fund’s expense ratio.

The dividend yield of a money market fund is influenced by several factors:

  • Prevailing Interest Rates: Higher interest rates generally result in higher yields.
  • Fund’s Expense Ratio: Lower expense ratios mean more of the interest earned is passed on to investors.
  • Credit Quality of Investments: Funds investing in higher-quality securities may have lower yields but are generally safer.
  • Maturity of Investments: Longer-maturity investments may offer higher yields but can also be more sensitive to interest rate changes.

2.4. What are the Risks Associated with Money Market Funds?

While money market funds are considered low-risk investments, they are not entirely risk-free. Key risks include:

  • Credit Risk: The risk that an issuer of a debt instrument may default on its obligations.
  • Interest Rate Risk: The risk that changes in interest rates may negatively impact the fund’s yield.
  • Inflation Risk: The risk that inflation may erode the purchasing power of returns.
  • Liquidity Risk: The risk that the fund may not be able to meet redemption requests due to insufficient liquidity.
  • Breaking the Buck: Though rare, a money market fund’s NAV can fall below $1 per share, resulting in a loss for investors.

To mitigate these risks, money market funds adhere to strict regulatory guidelines and employ prudent risk management strategies.

3. Types of Money Market Funds

Money market funds come in various forms, each tailored to different investment objectives and risk profiles. Understanding these types can help investors choose the most appropriate fund for their needs.

These funds offer various levels of safety, liquidity, and tax benefits. Let’s explore the common types of money market funds to understand the distinctions.

3.1. What are Prime Money Market Funds?

Prime money market funds invest in a mix of government and private debt securities, including commercial paper and certificates of deposit. They typically offer higher yields than government money market funds but also carry slightly higher credit risk.

The key characteristics of prime money market funds include:

  • Higher Yields: Generally offer higher yields compared to government money market funds.
  • Credit Risk: Carry slightly higher credit risk due to investments in private debt securities.
  • Diversification: Invest in a variety of debt instruments to spread risk.
  • Floating NAV: Required to use a floating net asset value (NAV), which can fluctuate with market conditions.

3.2. What are Government Money Market Funds?

Government money market funds invest primarily in U.S. government securities, such as Treasury bills and notes, as well as repurchase agreements collateralized by government securities. They are considered the safest type of money market fund due to the low credit risk of U.S. government debt.

Key attributes of government money market funds are:

  • Low Credit Risk: Considered the safest type of money market fund.
  • Government Securities: Primarily invest in U.S. government securities.
  • Fixed NAV: Allowed to maintain a stable net asset value (NAV) of $1 per share.
  • High Liquidity: Offer high liquidity due to the nature of their investments.

3.3. What are Tax-Exempt Money Market Funds?

Tax-exempt money market funds, also known as municipal money market funds, invest in short-term municipal securities issued by state and local governments. The interest income from these funds is typically exempt from federal income tax, and may also be exempt from state and local taxes, depending on the investor’s location and the fund’s investments.

Benefits of investing in tax-exempt money market funds include:

  • Tax Benefits: Interest income is exempt from federal income tax.
  • State and Local Tax Exemption: May also be exempt from state and local taxes.
  • Municipal Securities: Invest in short-term municipal securities.
  • Lower Yields: Typically offer lower yields compared to taxable money market funds due to the tax benefits.

3.4. How Do I Choose the Right Type of Money Market Fund?

Choosing the right type of money market fund depends on your individual investment objectives, risk tolerance, and tax situation. Consider the following factors:

  • Risk Tolerance: If you are risk-averse, a government money market fund may be the best option.
  • Tax Situation: If you are in a high tax bracket, a tax-exempt money market fund may provide the most after-tax return.
  • Yield Requirements: If you are seeking the highest possible yield, a prime money market fund may be suitable, but be aware of the higher credit risk.
  • Liquidity Needs: All money market funds offer high liquidity, but it’s essential to ensure the fund meets your specific needs.

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4. Money Market Fund Regulations

Money market funds are subject to strict regulations designed to protect investors and maintain the stability of the financial system. These regulations, primarily enforced by the Securities and Exchange Commission (SEC) in the U.S., govern various aspects of fund operations, including investment guidelines, liquidity requirements, and disclosure obligations.

The SEC’s regulations are designed to enhance the resilience of money market funds and reduce the risk of investor runs. These regulations cover several key areas, so let’s dive in.

4.1. What are the Key Regulatory Requirements for Money Market Funds?

The SEC’s regulations for money market funds include the following key requirements:

  • Investment Guidelines: Funds must invest in high-quality, short-term debt instruments with a weighted average maturity (WAM) of 60 days or less and a weighted average life (WAL) of 120 days or less.
  • Liquidity Requirements: Funds must maintain a minimum level of daily and weekly liquid assets to meet redemption requests.
  • Credit Quality Standards: Funds must adhere to strict credit quality standards for their investments, minimizing the risk of default.
  • Disclosure Obligations: Funds must provide detailed disclosures to investors about their investment strategies, portfolio holdings, and risk profiles.
  • Stress Testing: Funds are required to conduct regular stress tests to assess their ability to withstand adverse market conditions.

4.2. How Do These Regulations Protect Investors?

These regulations protect investors by:

  • Minimizing Credit Risk: By requiring investments in high-quality debt instruments.
  • Ensuring Liquidity: By mandating minimum levels of liquid assets.
  • Promoting Transparency: By requiring detailed disclosures about fund operations.
  • Enhancing Stability: By requiring stress testing to assess resilience to market shocks.
  • Preventing Runs: By implementing measures to address potential investor runs.

4.3. What are the 2010 and 2016 SEC Reforms?

In response to the 2008 financial crisis, the SEC implemented significant reforms to enhance the regulation of money market funds. The 2010 reforms focused on improving liquidity and credit quality standards, while the 2016 reforms introduced floating net asset values (NAV) for prime money market funds and new redemption fee and gate provisions.

  • 2010 Reforms:

    • Enhanced Liquidity Requirements: Increased minimum levels of daily and weekly liquid assets.
    • Credit Quality Standards: Implemented stricter credit quality standards for investments.
    • Stress Testing: Required funds to conduct regular stress tests.
  • 2016 Reforms:

    • Floating NAV: Required prime money market funds to adopt a floating NAV, which can fluctuate with market conditions.
    • Redemption Fees and Gates: Allowed non-government money market funds to impose redemption fees and gates during times of stress to prevent investor runs.

4.4. How Have These Regulations Impacted Money Market Funds?

These regulations have had a significant impact on money market funds, leading to:

  • Increased Stability: Enhanced liquidity and credit quality standards have made funds more resilient to market shocks.
  • Greater Transparency: Detailed disclosure requirements have provided investors with more information about fund operations.
  • Reduced Risk of Runs: Redemption fees and gates have reduced the risk of investor runs during times of stress.
  • Lower Yields: Stricter investment guidelines and liquidity requirements have resulted in slightly lower yields for some funds.

5. Advantages and Disadvantages of Money Market Funds

Money market funds offer a range of benefits, including low risk and high liquidity. However, they also have drawbacks, such as modest returns and sensitivity to interest rate fluctuations. Evaluating these pros and cons can help investors determine whether money market funds align with their financial goals.

For short-term savings and capital preservation, they are an ideal choice, so let’s discuss some more information about their strengths and weaknesses.

5.1. What are the Primary Advantages of Investing in Money Market Funds?

The primary advantages of investing in money market funds include:

  • Low Risk: Money market funds invest in high-quality, short-term debt instruments, reducing the risk of capital loss.
  • High Liquidity: Investors can easily access their funds without significant penalties, making it suitable for short-term investment needs.
  • Modest Returns: While returns are not as high as other investments, they are generally higher than traditional savings accounts.
  • Diversification: Money market funds offer diversification by investing in a variety of debt instruments, spreading risk across multiple issuers.

5.2. What are the Key Disadvantages of Investing in Money Market Funds?

The key disadvantages of investing in money market funds include:

  • Modest Returns: Returns are typically lower than other investments, such as stocks or bonds.
  • Inflation Risk: The returns may not keep pace with inflation, eroding the purchasing power of the investment.
  • Interest Rate Risk: Changes in interest rates can negatively impact the fund’s yield.
  • Not FDIC Insured: Money market funds are not insured by the FDIC, although they are typically insured by the SIPC.
  • Tax Implications: Interest income is subject to federal, state, and local taxes.

5.3. How Do Money Market Funds Compare to Savings Accounts?

Money market funds and savings accounts both offer safe and liquid investment options, but they have key differences:

  • Returns: Money market funds typically offer higher returns than savings accounts.
  • Risk: Money market funds are slightly riskier than savings accounts, as they are not FDIC insured.
  • Liquidity: Both offer high liquidity, but money market funds may have restrictions on the number of withdrawals per month.
  • Insurance: Savings accounts are FDIC insured, while money market funds are SIPC insured.

5.4. When Should You Consider Investing in Money Market Funds?

Consider investing in money market funds when you:

  • Need a Safe Place to Park Cash: Money market funds are suitable for parking cash while waiting for other investment opportunities.
  • Require High Liquidity: Money market funds offer easy access to funds for short-term needs.
  • Want Higher Returns Than Savings Accounts: Money market funds typically offer higher returns than traditional savings accounts.
  • Are Saving for a Short-Term Goal: Money market funds can be a good option for saving for short-term goals, such as a down payment on a house.

6. Historical Performance of Money Market Funds

Money market funds have a long history, dating back to the early 1970s. Over the years, they have provided investors with a stable and liquid investment option, although their performance has varied depending on market conditions and interest rate environments.

These funds are known for their stability, but they are not immune to market conditions, so let’s take a look at the historical performance.

6.1. How Have Money Market Funds Performed Over Time?

Over the long term, money market funds have generally provided modest returns with low volatility. Their performance is closely tied to short-term interest rates, which are influenced by monetary policy and economic conditions.

  • Historical Trends:
    • 1970s-1980s: High interest rates led to strong performance for money market funds.
    • 1990s-2000s: Declining interest rates resulted in lower yields.
    • 2008 Financial Crisis: Some money market funds experienced stress, leading to regulatory reforms.
    • Post-Crisis Period: Low interest rates and stricter regulations have kept yields relatively low.

6.2. What Impact Did the 2008 Financial Crisis Have on Money Market Funds?

The 2008 financial crisis had a significant impact on money market funds. The collapse of Lehman Brothers led to the Reserve Primary Fund “breaking the buck,” causing widespread panic and investor runs. In response, regulators implemented reforms to enhance the stability and resilience of money market funds.

  • Key Events:
    • Lehman Brothers Collapse: Triggered a liquidity crisis in the money market fund industry.
    • Reserve Primary Fund: “Broke the buck,” causing investor panic and runs.
    • Regulatory Response: Led to stricter regulations and reforms to enhance stability.

6.3. How Have Regulatory Changes Affected Money Market Fund Performance?

Regulatory changes implemented after the 2008 financial crisis have affected money market fund performance in several ways:

  • Increased Stability: Enhanced liquidity and credit quality standards have made funds more resilient to market shocks.
  • Greater Transparency: Detailed disclosure requirements have provided investors with more information about fund operations.
  • Reduced Risk of Runs: Redemption fees and gates have reduced the risk of investor runs during times of stress.
  • Lower Yields: Stricter investment guidelines and liquidity requirements have resulted in slightly lower yields for some funds.

6.4. What Factors Influence Money Market Fund Yields?

Several factors influence money market fund yields, including:

  • Short-Term Interest Rates: Yields are closely tied to short-term interest rates, such as the federal funds rate.
  • Monetary Policy: Actions by the Federal Reserve can impact short-term interest rates and money market fund yields.
  • Economic Conditions: Economic growth, inflation, and unemployment can influence interest rates and yields.
  • Credit Spreads: The difference between the yields on high-quality and lower-quality debt instruments can impact fund performance.

7. Money Market Funds vs. Other Short-Term Investments

Money market funds are just one option for investors seeking short-term, liquid investments. Other alternatives include high-yield savings accounts, certificates of deposit (CDs), and ultra-short bond funds. Comparing these options can help investors choose the most appropriate investment for their needs.

Each of these investment options offers a different balance of safety, liquidity, and returns, so let’s compare how they stack up!

7.1. How Do Money Market Funds Compare to High-Yield Savings Accounts?

Money market funds and high-yield savings accounts both offer safe and liquid investment options, but they have key differences:

  • Returns: Money market funds typically offer higher returns than high-yield savings accounts.
  • Risk: Money market funds are slightly riskier than high-yield savings accounts, as they are not FDIC insured.
  • Liquidity: Both offer high liquidity, but money market funds may have restrictions on the number of withdrawals per month.
  • Insurance: High-yield savings accounts are FDIC insured, while money market funds are SIPC insured.

7.2. What Are the Advantages of Certificates of Deposit (CDs)?

Certificates of deposit (CDs) are time deposits offered by banks, providing a fixed interest rate for a specific period. Key advantages include:

  • Fixed Interest Rate: CDs offer a fixed interest rate, providing predictable returns.
  • FDIC Insurance: CDs are FDIC insured, protecting against loss of principal.
  • Higher Yields: CDs typically offer higher yields than savings accounts and money market funds for longer maturities.

7.3. How Do Ultra-Short Bond Funds Differ from Money Market Funds?

Ultra-short bond funds invest in a portfolio of short-term bonds, typically with maturities of one year or less. Key differences from money market funds include:

  • Higher Risk: Ultra-short bond funds carry higher risk than money market funds, as they invest in bonds with longer maturities and lower credit quality.
  • Higher Returns: Ultra-short bond funds typically offer higher returns than money market funds due to the higher risk.
  • Interest Rate Sensitivity: Ultra-short bond funds are more sensitive to changes in interest rates than money market funds.
  • Floating NAV: Ultra-short bond funds have a floating NAV, which can fluctuate with market conditions.

7.4. Which Investment Option is Right for You?

The best investment option depends on your individual investment objectives, risk tolerance, and time horizon. Consider the following factors:

  • Risk Tolerance: If you are risk-averse, high-yield savings accounts or money market funds may be the best option.
  • Time Horizon: If you have a short-term investment horizon, money market funds or CDs may be suitable.
  • Return Requirements: If you are seeking higher returns, ultra-short bond funds may be an option, but be aware of the higher risk.
  • Liquidity Needs: If you need easy access to your funds, money market funds or high-yield savings accounts may be the best choice.

8. How to Invest in Money Market Funds

Investing in money market funds is a straightforward process that can be done through various channels, including brokerage firms, mutual fund companies, and banks. Understanding the steps involved can help investors get started.

You can open an account, compare funds, and monitor your performance to make the most of these investments, so let’s explore.

8.1. What are the Steps to Invest in Money Market Funds?

The steps to invest in money market funds include:

  1. Open an Account: Open an account with a brokerage firm, mutual fund company, or bank that offers money market funds.
  2. Research Funds: Research different money market funds to find one that aligns with your investment objectives, risk tolerance, and tax situation.
  3. Compare Fees: Compare the fees and expenses of different funds to minimize costs.
  4. Fund the Account: Fund your account by transferring money from a bank account or other investment account.
  5. Purchase Shares: Purchase shares of the money market fund.
  6. Monitor Performance: Monitor the performance of the fund and make adjustments as needed.

8.2. Where Can You Purchase Money Market Funds?

Money market funds can be purchased through:

  • Brokerage Firms: Brokerage firms offer a wide range of money market funds from various fund companies.
  • Mutual Fund Companies: Mutual fund companies offer their own money market funds directly to investors.
  • Banks: Some banks offer money market funds as part of their investment services.
  • Online Platforms: Robo-advisors and other online platforms also provide access to money market funds.

8.3. What Fees and Expenses Should You Consider?

When investing in money market funds, it’s important to consider the fees and expenses, which can impact your returns. Key fees and expenses include:

  • Expense Ratio: The annual fee charged by the fund to cover operating expenses.
  • Management Fees: Fees paid to the fund’s investment manager.
  • 12b-1 Fees: Marketing and distribution fees.
  • Transaction Fees: Fees charged for buying or selling shares.

8.4. How Do You Monitor the Performance of Your Money Market Fund?

Monitor the performance of your money market fund by:

  • Reviewing Statements: Reviewing monthly or quarterly statements to track your returns.
  • Tracking Yields: Tracking the fund’s yield to see how it compares to other money market funds and benchmarks.
  • Monitoring Net Asset Value (NAV): Monitoring the fund’s NAV to ensure it remains stable.
  • Staying Informed: Staying informed about market conditions and regulatory changes that could impact the fund’s performance.

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9. Tax Implications of Money Market Funds

Investing in money market funds can have tax implications that investors should be aware of. The interest income generated by these funds is typically subject to federal, state, and local taxes. Understanding these tax rules can help investors make informed decisions and minimize their tax burden.

Make sure you factor in the tax implications when evaluating their overall appeal!

9.1. How Is Interest Income from Money Market Funds Taxed?

Interest income from money market funds is generally taxed as ordinary income at the federal, state, and local levels. The tax rate depends on the investor’s income tax bracket.

  • Federal Income Tax: Interest income is subject to federal income tax.
  • State and Local Taxes: Interest income may also be subject to state and local taxes, depending on the investor’s location.

9.2. What Are Tax-Exempt Money Market Funds?

Tax-exempt money market funds, also known as municipal money market funds, invest in short-term municipal securities issued by state and local governments. The interest income from these funds is typically exempt from federal income tax, and may also be exempt from state and local taxes, depending on the investor’s location and the fund’s investments.

  • Federal Tax Exemption: Interest income is exempt from federal income tax.
  • State and Local Tax Exemption: May also be exempt from state and local taxes, providing additional tax benefits.

9.3. How Can You Minimize Taxes on Money Market Fund Investments?

You can minimize taxes on money market fund investments by:

  • Investing in Tax-Exempt Funds: Investing in tax-exempt money market funds can provide tax-free income.
  • Holding Funds in Tax-Advantaged Accounts: Holding money market funds in tax-advantaged accounts, such as 401(k)s or IRAs, can defer or eliminate taxes.
  • Tax-Loss Harvesting: Selling losing investments to offset capital gains and reduce your overall tax liability.
  • Consulting a Tax Advisor: Consulting a tax advisor can help you develop a tax-efficient investment strategy.

9.4. What Tax Forms Will You Receive?

Investors in money market funds will typically receive the following tax forms:

  • Form 1099-DIV: Reports dividend income, including interest income from money market funds.
  • Form 1099-INT: Reports interest income from money market funds.
  • Form 1099-OID: Reports original issue discount income from money market funds.

10. Common Misconceptions About Money Market Funds

Despite their popularity, money market funds are often misunderstood. Clearing up these misconceptions can help investors make informed decisions and avoid common pitfalls.

These misconceptions can lead to inappropriate investment decisions, so let’s debunk some of the most common myths!

10.1. Are Money Market Funds Risk-Free?

Misconception: Money market funds are risk-free.

Fact: While money market funds are considered low-risk investments, they are not entirely risk-free. They are subject to credit risk, interest rate risk, and inflation risk.

  • Credit Risk: The risk that an issuer of a debt instrument may default on its obligations.
  • Interest Rate Risk: The risk that changes in interest rates may negatively impact the fund’s yield.
  • Inflation Risk: The risk that inflation may erode the purchasing power of returns.

10.2. Are Money Market Funds FDIC Insured?

Misconception: Money market funds are FDIC insured.

Fact: Money market funds are not FDIC insured. They are typically insured by the Securities Investor Protection Corporation (SIPC), which provides protection in case the brokerage firm holding the funds fails.

  • FDIC Insurance: Protects deposits in banks and savings associations.
  • SIPC Insurance: Protects investors in brokerage firms.

10.3. Do Money Market Funds Offer High Returns?

Misconception: Money market funds offer high returns.

Fact: Money market funds typically offer modest returns, which are generally higher than traditional savings accounts but lower than other investments, such as stocks or bonds.

  • Modest Returns: Yields are closely tied to short-term interest rates and may not keep pace with inflation.

10.4. Are All Money Market Funds the Same?

Misconception: All money market funds are the same.

Fact: Money market funds come in various forms, each tailored to different investment objectives and risk profiles. Key types include prime money market funds, government money market funds, and tax-exempt money market funds.

  • Prime Money Market Funds: Invest in a mix of government and private debt securities.
  • Government Money Market Funds: Invest primarily in U.S. government securities.
  • Tax-Exempt Money Market Funds: Invest in short-term municipal securities.

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