Definition
An investment fund that pools money to buy short-term, low-risk securities, aiming to preserve capital while earning modest returns.
What to consider
- Know that these funds are designed to preserve capital.
- They’re a low-risk option for parking money temporarily.
- Check their performance against other savings options periodically.
Real world scenarios
- David allocates part of his portfolio to a money market fund for stability, balancing riskier stock investments. The fund’s liquidity reassures him he can access cash if needed.
- Hannah uses a money market fund as a temporary holding place for capital between different stock trades. She benefits from modest returns instead of leaving money idle.
- Choosing a money market fund helps Jared earn more than a basic savings account while preserving quick access to his funds. He appreciates the minimal price fluctuations.
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