Money Market Funds – Mutual Fund Services Noted in Prospectus

The combination of services that are offered to shareholders differs from the various money market funds.  Reviewing the mutual fund literature carefully will help to determine which services are offered and which may be especially important for a particular investors needs.  The following is a list of some of the features offered by money market funds and mutual fund companies that investors may want to consider when evaluating a fund.

All money market funds will establish some level of minimum initial investment.  Some money funds that are open to individual consumers require only $250 or $500 as a minimum investment to open an account, while others, especially those geared toward institutional investors, require more than $10,000.00 to open an account.  An investor may also want to consider the minimum level for subsequent investments, which is the smallest amount of money that can be deposited into an existing money market account.

Most all funds offer some degree of checking privileges on the money market account. The check redemption privilege permits the fund owner to withdraw money by writing a check for an amount equal to or exceeding the money fund’s minimum check amount.  These checks are, in effect, the same as any bank check and can be written to a third party.  The typical minimum check allowed by a money fund is $500, although some funds have no minimums.

Some money funds provide unlimited checks to the investor at no charge, while others offer only a minimum amount.  Money market funds may also charge a small fee for use of a check. Funds usually offer confirmations of check transactions.  Canceled checks or photocopies of checks are usually returned monthly, quarterly, or upon request.

Mutual fund companies will offer telephone redemption and exchange privileges. This privilege allows a money market fund owner to request, by telephone, that the fund redeem all or part of the investment.  It is usually used to request that the fund wire the money to a bank account designated on an application but may be used to purchase other funds within the mutual fund company’s fund family or exchange shares within the mutual fund company.

Exchange privileges permit you to exchange shares of a money fund with shares of another mutual fund in the same mutual fund family.  Investors who would rather be in a bond fund, stock fund or some other type of mutual fund will often switch their investments using this privilege.  Some investors use this ability more aggressively than others, taking advantage of market swings and interest rate fluctuations.  The procedures for using the exchange privilege vary among funds, the money market fund prospectus from the different mutual fund companies will disclose the individual limitations and restrictions their funds posses.

Some mutual fund companies aggregate features together.  Central asset accounts combine several financial tools, such as one or more money funds, checking privileges, debit or credit cards, and a securities or discount brokerage account, into one coordinated asset management program.  Fees, the type of debit card, checking minimum and minimum initial investment vary from plan to plan between mutual fund companies.

This entry was posted on Tuesday, January 6th, 2009 at 3:05 pm and is filed under Mutual Funds. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.