Money Market Funds

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The Money market instruments that are being used to structure the money market mutual funds are highly liquid debt instruments like the treasury bills. The Association of the Mutual Funds of India (AMFI) and the Securities and Exchange Board of India (SEBI) have been instrumental in introducing the wide array of mutual funds in the Indian capital market.

Individuals and companies invest in mutual funds with the expectation of appreciation of the capital invested in these companies. Mutual funds are of various types and are structured according to the risk bearing factor of the investors.

The opening up of the Indian economy brought about the generation of a number of special types of mutual funds in India. The Association of the Mutual Funds of India (AMFI) and the Securities and Exchange Board of India (SEBI) have played an active role in introducing various types of mutual funds in the Indian capital market. One such type of fund called the money market fund was essentially structured to capitalize on the growth of money market instruments.

Definition and features of the Money Market Funds:

Money Market Funds is a special type of mutual fund that invests in the money market instruments only. The Money market instruments that are being used to structure the money market mutual funds are highly liquid debt instruments like the treasury bills. These Money market funds generally bear less risk and are regarded as the safest type of mutual funds. The main objective of investment in a money-market fund is to safeguard principal investment while earning a modest return on such investments. In other words, investments in a Money-market mutual fund are similar to a high-yield bank account with a decent risk factor. Caution should be exercised with respect to the interest rate that is being offered while investing in a money-market fund.

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Last Updated 06/30/2011

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