Money Market Mutual Funds

A Money Market Mutual Fund, also called a Money Market Fund is a kind of mutual fund that invests in highly liquid, near-term instruments. These instruments include cash, cash equivalent securities, and high-credit-rating, debt-based securities with a short-term maturity (such as U.S. Treasuries). Money market funds are intended to offer investors high liquidity with a very low level of risk. Money market funds are considered extremely low-risk on the investment spectrum.

Types of Money Market Funds
Money market funds are classified into various types depending upon the class of invested assets, the maturity period, and other attributes.

Prime Money Fund
A prime money fund invests in floating-rate debt and commercial paper of non-Treasury assets, like those issued by corporations, U.S. government agencies, and government-sponsored enterprises (GSEs).

Government Money Fund
A government money fund invests at least 99.5% of its total assets in cash, government securities, and repurchase agreements that are fully collateralized by cash or government securities.

Treasury Fund
A Treasury fund invests in standard U.S. Treasury-issued debt securities, such as Treasury bills, Treasury bonds, and Treasury notes.

Tax-Exempt Money Fund
A tax-exempt money fund offers earnings that are free from U.S. Federal income tax. Depending on the exact securities it invests in, a tax-exempt money fund may also have an exemption from state income taxes. Municipal bonds and other debt securities primarily constitute such types of money market funds.

Some money market funds are targeted to attract institutional money with a high minimum investment amount (oftentimes $1 million). Still, other money market funds are retail money funds and are accessible to individual investors as a result of their small minimums.

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