Money market mutual funds provide a relatively stable vehicle to invest funds on a short-term basis that are ultimately destined for longer term investments within a brokerage account. A money market mutual fund is a type of mutual fund that is required by law to invest in low-risk securities. These funds have relatively low volatility compared to other mutual funds and pay dividends that generally reflect short-term interest rates. It is important to remember that unlike a “money market deposit account” at a bank, money market mutual funds are not federally insured.
Money market funds typically invest in government securities, certificates of deposit, commercial paper of companies, or other highly liquid and low-risk securities. They attempt to keep their net asset value (NAV) at a constant $1.00 per share and only the yield goes up and down. But a money market’s per share NAV may fall below $1.00 if the investments perform poorly. While investor losses in money markets have been rare, they are possible. Therefore, it is important that you carefully read the prospectus and consider the risks of the money market mutual fund prior to investing.
Your Ocean Financial Services investment professional can provide you with additional information regarding the money market mutual fund alternatives available within our brokerage accounts.