MONEYMARKET FUND Meaning and
Definition
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A money market fund is a type of mutual fund that invests in short-term, high-quality fixed income securities such as Treasury bills, certificates of deposits, commercial paper, and other money market instruments. It aims to provide investors with a relatively low-risk investment option that combines liquidity, preservation of capital, and modest returns.
These funds are typically managed by financial institutions and are structured to maintain a stable net asset value (NAV) per share, usually set at $1. Although they are not insured by the government, their stability and conservative investment strategies aim to minimize the risk of loss.
Investors often turn to money market funds as a short-term cash management tool, seeking an alternative to keeping money in low-yield savings accounts with commercial banks. They offer accessibility to funds by allowing investors to redeem their shares promptly, usually within one business day.
Money market funds provide a convenient and efficient way to earn a competitive return on idle cash while preserving capital and maintaining liquidity. They are suitable for both individual investors and institutional investors who seek a secure and liquid investment option for excess cash that is not immediately needed.
In summary, a money market fund is a type of mutual fund that invests in short-term, high-quality fixed income securities and aims to provide investors with liquidity, preservation of capital, and modest returns, making it a preferred choice for short-term cash management purposes.
Common Misspellings for MONEYMARKET FUND
- moneymarket funds
- money-marked fund
- noneymarket fund
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Etymology of MONEYMARKET FUND
The word "moneymarket fund" is a combination of two terms: "money market" and "fund".
The term "money market" originates from the concept of a financial market where short-term borrowing and lending of funds occur. The phrase "money market" was first used in the early 20th century to refer to a specific segment of the financial market dealing with short-term debt instruments and low-risk investments.
The term "fund" refers to a pool of money or financial resources that are collected and managed for a particular purpose. The word "fund" is derived from the Latin word "funds", meaning "a sum of money".
When these two terms are combined to form "moneymarket fund", it refers to a type of mutual fund that invests in low-risk, short-term debt instruments and aims to generate competitive returns for investors while maintaining liquidity.
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