What are money market investments?
Money market funds are pools of short-term investments that usually mature within a time period defined at the time of purchase, often one year.
Unlike a bank savings account, they are not FDIC- guaranteed and can lose value. They seek to maintain a stable net asset value of $1. Money market funds invest in short-term debt instruments such as bank certificates of deposit, repurchase agreements, and government-agency obligations. An investment in a money market fund is not guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve your investment at $1.00 per share, it is possible to lose money by investing in the fund.
Typically offering higher rates of return than traditional bank deposit accounts, money market mutual funds provide an element of stability and can help diversify your portfolio. Money market investments generally have a high credit quality. Credit quality is determined by a number of independent agencies, including Standard & Poor’s and Moody’s, who examine the issuer’s risk of default. Money market investments typically have little risk of not being able to repay their debt. Because of this high quality, they are considered low-risk, conservative investments.
Investing too heavily in money market funds, however, can hurt your potential for long-term growth. Because money market returns tend to just keep pace with inflation before taking taxes into account, investments in money market mutual funds can actually lose purchasing power after income taxes once annual returns are factored in.
Saving and investing basics
Please consider the charges, risks, expenses and investment objectives carefully before purchasing a mutual fund or exchange-traded fund. For a prospectus containing this and other information, please contact a financial professional. Read it carefully before you invest or send money.