Do you want to start an investment journey where you can seamlessly liquidity your funds? Your financial goals may align with money market funds perfectly! You can channalise short-term investments and generate stable returns, ensuring a potentially stable investment capital. This approach suits middle-class investors who wish for better outcomes than traditional savings accounts and fixed deposit schemes.
Money market funds have oversight of the Securities and Exchange Board of India (SEBI), enabling them to provide an accessible gateway to customers and help them create a diverse portfolio.
Let’s learn more about money market funds in this article!
Why should one invest in Money Market Funds?
Here are some reasons why you should consider investing in money market funds!
Risk Mitigation:
If you want to explore the world where you can invest in low-risk instruments like Treasury bills and Commercial Papers (CPs), money market funds are for you! These instruments have support from the government and reputable corporations, enabling focus on stability against potential market erosions.
Unparalleled Liquidity:
One of the advantages that you need to consider about money market funds is the liquidity options. This scheme is different from usual rigid structure plans like traditional fixed deposits. You may invest and redeem your units on demand, with or without an exit load.
Stability Coupled with Predictability:
Money market funds can generate potentially stable and predictable returns for you in a short investment horizon. These returns may not be similar to equity fund profits, yet they are chosen for low risks and maximum consistency.
Professional Acumen:
Like other mutual fund options, money market funds offer professional management. Experts are here to help you make decisions and analyse the market conditions for investment and return decisions. A professional’s opinion helps you build confidence in your investment strategy and adds up additional value!
Required Diversification:
Money market funds allow customers to indirectly invest in numerous instruments, diversifying and reducing the total risk over issuers and maturities. Negative impact reaches reduction rates, and the investor gets reasonable profits with this approach.
What are some Money Market Instruments one should know about?
Treasury Bills (T-Bills):
Treasury Bills are short-term debt instruments issued by the government to help in the mobilisation of funds. Investment maturity can span from a few days to one year. T-Bills offer the maximum credibility from the government’s end!
Commercial Papers (CPs):
If you are searching for a versatile instrument, Commercial Papers (CPs) are where you stop your search! This instrument is unsecured and ideal for established corporations willing to fulfil their brief funding needs. CPs offer enhanced liquidity with a maturity period ranging from 15 days to one year!
Certificates of Deposit (CDs):
Let’s talk about Certificates of Deposit (CDs), time deposits created by numerous banks and financial institutions. The investor receives an unwavering maturity date with a specified interest rate, with a negotiable and tradable secondary market (without the maturity period).
Repurchase Agreements (Repos):
Repurchase Agreements (Repos) are short-term pacts, allowing one party to engage in sales of securities with a repurchasing commitment at predetermined dates and prices! These instruments come in use while borrowing and lending money among banks and financial institutions.
Final Note
If you are a middle-class investor seeking stability, liquidity, and modest returns, money market funds are the required investment strategy for you! You may get relative stability and professional management while investing while getting a chance to diversify your portfolio. Create a balance between your growth and investment security, and invest in mutual funds now!
Disclaimer: Mutual fund investments are subject to market risks. Read all scheme-related documents carefully before investing.
