Netizens asked:
What are money market funds?
Lawyer’s answer:
Money market fund refers to a fund that invests in short-term securities in the money market. The fund's assets mainly invest in short-term monetary instruments such as treasury bills, commercial paper, bank certificates of deposit, short-term government bonds, corporate bonds and other short-term securities.
Relevant legal knowledge:
Money market funds were first created in the United States in 1972. By the end of 1986, there were more than 400 money market funds in the United States, with total assets exceeding $290 billion. In the United States, money market funds can be divided into two categories based on risk: ①Treasury bill money market funds, which mainly invest in treasury bills and securities guaranteed by the government. These securities generally mature in less than one year, with an average maturity of 120 days. ② Diversified money market funds, commonly known as money market funds, usually invest in various securities such as commercial paper, treasury bills, securities issued by U.S. government agencies, negotiable certificates of deposit, bank acceptance notes, etc. The expiration time Similar to the aforementioned funds. ③Tax-free money funds, mainly used for short-term financing of high-quality municipal securities, including municipal mid-term bonds and municipal long-term bonds. The advantage of tax-free money market funds is that they can reduce taxes, but their yields are usually lower than those of general money market funds (about 30% to 40% lower). It is not cost-effective for investors to choose this fund when the tax rate is not high.
Money market funds have the following characteristics compared with traditional funds: ① The main difference between money market funds and other funds that invest in stocks is that the net asset value of the fund unit is Fixed, usually 1 yuan per fund unit. After investing in the fund, investors can reinvest the proceeds, and the investment income will continue to accumulate, increasing the fund shares owned by investors. For example, an investor invests 100 yuan in a money market fund and can own 100 fund units. After one year, if the investment return is 8%, then the investor will have 8 more fund units, a total of 108 fund units, worth 108 yuan. ②The standard for measuring the performance of money market funds is the rate of return, which is consistent withOther funds profit differently from the appreciation of net asset value. ③Good liquidity and high capital security. These characteristics mainly stem from the fact that the currency market is a low-risk, highly liquid market. At the same time, investors are not restricted by the maturity date and can transfer fund units at any time as needed. 4. Low risk. The maturity date of money market instruments is usually very short. The average maturity of money market fund investment portfolio is generally 4 to 6 months, so the risk is low. Its price is usually only affected by market interest rates. ⑤The investment cost is low. Money market funds usually do not charge redemption fees, and their management fees are also low. The annual management fees of money market funds are approximately 0.25% to 1% of the fund's net asset value, which is 1% to 2.5% higher than the annual management fee of traditional funds. Low. 6. Money market funds are all open-end funds. Money market funds are usually regarded as risk-free or low-risk investment tools. They are suitable for short-term investment of capital to generate interest for emergency needs, especially when interest rates are high, inflation is high, security liquidity decreases, and credibility is reduced. The principal is protected from loss.
