Mutual Funds have been a common investment choice for quite a while now. They are one of the safest and most reliable investment avenues. Besides, they are also relatively easy to follow, given their simplistic structure. A prime example of such a scheme is a Money Market Fund. It is an open-ended fund that invests mainly in short-term debt securities. Its sole objective is to help the investor sustain a stable asset value through liquid investments.
The following are other reasons why it is wise to invest in such funds:
Parks your money safely
The stock market is usually volatile. Therefore, you must park your funds in a safe and accessible investment vehicle. This is when such funds come in handy. Since they are low-risk outlets, they pose relatively fewer risks than their stock and bond counterparts. These funds also generate a low single-digit return for the investor. This works in favour of those investing in the down market.
Offers high liquidity
A Money Market Fund allows the holder to move their funds freely. It also lets them redeem the invested money partly or entirely, as per their need. They enjoy complete flexibility in terms of withdrawing funds and receiving the current value of the units.
Offers stability
The fund offers stability, despite its short-term investment appeal. As it holds significantly lower market risks, you do not have to worry about fluctuations. It matures within a short period. That way, you get a stable and steady source of income for that specific duration.
Facilitates short-term investments
Sometimes, you might not be interested in long-term investment schemes. The reason could be as simple as you not having a definitive plan. In such situations, you can invest in a Money Market Fund. Since it offers quick maturity dates, it is a viable scheme for short-term investments.
High return potential
When you park your funds in an investment channel for too long, you put them at significant risk. But when you invest such funds, you decrease the likelihood of such situations. It is an open-ended investment option; it offers you high return potential. Plus, its short maturity period reduces the impact cost significantly. These combined make it a promising Investment Banking option.
Ideal for low-risk investors
Money Market Funds carry relatively lesser market risks. Hence, they serve as ideal investment options for a low-risk investor. They also serve as an alternative for first-time investors in some situations. For example, you want to venture into Mutual Funds but do not want to invest in long-term schemes with risks. In this case, you can pick a Money Market Fund to kickstart your investment journey.
