What Do Money Market Funds Invest In?
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What Do Money Market Funds Invest In?
Money market mutual funds invest in a variety of money markets.
Things To Know
- Money market funds invest in both government and non-government securities.
Examples of money markets
Money market funds invest in US Treasury bills, commercial paper, banker’s acceptances, negotiable certificates of deposit, repurchase agreements, and short-term debts of US government agencies. A fund’s prospectus or quarterly report will list the instruments it uses. Money market funds exist in a variety of forms, described below.
Some are tax-free
Tax-exempt money funds invest in municipal securities with very short maturities (30–90 days). The interest they earn is usually free from federal tax and some state taxes. Because of the tax-free feature, however, their yields are comparatively lower than those of taxable funds. Over 300 tax-exempt money funds are available on the market.
Government funds
US Treasury funds buy short-term US Treasury bills (T-bills). Their yields are also comparatively lower than those of other funds. This is because their income is free from state and local taxes and because they are considered very safe.
US government funds buy Treasury bills, federal agency notes, and repurchase agreements. Money market mutual funds invest in a large pool of holdings made up of any of the investments listed above, concentrating on non-government securities.
