Money market mutual funds are certainly very liquid, there is no penalty for withdrawing your money and the mutual funds that run the account invest in only short term debt instruments like U.S. Treasuries and short term commercial paper. Risk, however, does exist. First, money market mutual funds are securities and have the inherent risk of potential loss of principal. Investor losses in money market mutual funds have been rare, but the loss of principal is possible. Second, the rate of return is variable. Past performance on all mutual funds is no guarantee of future returns and this holds true for money market mutual funds as well. Lastly, is the opportunity cost of investing in a relatively secure short term investment that has a comparatively low rate of return. This opportunity cost is the risk that a greater rate of return exists with higher risks or more importantly, that the low rate of return you receive will not keep pace with the rate of inflation.

No user commented in " If money market mutual funds allow easy access to my funds and are relatively safe, what are the risks involved in placing my short-term savings in these accounts? "

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