MONEYMARKET FUNDS Meaning and
Definition
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Money market funds are a type of mutual fund that invests in short-term, low-risk securities such as Treasury bills, commercial paper, certificates of deposit, and other money market instruments. These funds are designed to provide investors with a relatively safe and liquid investment option that offers a modest return.
The primary objective of money market funds is to preserve capital, making them an attractive choice for conservative investors who are seeking to protect their principal. They are often used as a temporary parking place for cash, providing a higher return than a traditional savings account while maintaining a high level of safety.
These funds typically maintain a stable net asset value (NAV) of $1 per share, meaning that the value of the shares does not fluctuate. However, this is not guaranteed, and in rare cases, a money market fund's NAV can "break the buck" and fall below $1, usually due to a significant default or bankruptcy of one of its holdings.
Investors can buy and sell shares of money market funds on any business day, allowing for ease of liquidity and accessibility to funds when needed. They are subject to regulations and oversight by the Securities and Exchange Commission (SEC) to ensure transparency and protect investors' interests.
Overall, money market funds serve as a low-risk, short-term investment vehicle that aims to preserve capital while providing a modest return.
Common Misspellings for MONEYMARKET FUNDS
- noneymarket funds
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Etymology of MONEYMARKET FUNDS
The word "moneymarket funds" has a straightforward etymology.
The term "money market" originates from the late 19th century and refers to a financial market where short-term borrowing and lending occur. This includes activities related to short-term debt securities, such as treasury bills, certificates of deposit, commercial paper, and other highly liquid and low-risk instruments.
The word "funds" in this context refers to pooled investment vehicles or mutual funds that invest in money market instruments. These funds pool together money from individual investors and invest it in short-term, low-risk instruments with the aim of preserving the principal value and providing relatively stable returns.
So, when combined, "moneymarket funds" simply refers to mutual funds that invest in money market instruments.
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