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What is a Money Market Mutual Funds (MMMFs)

by Uddipana Gogoi

Money market mutual funds (MMMFs) is a scheme of mutual funds. The objective of this scheme is to provide short term investment avenues to potential investors. Money market mutual funds (MMMFs) is an open-end fund. The scheme makes investment only in money market instruments. Such money market instruments are treasury bills, commercial papers, certificates of deposits, repo etc. According to the SEBI, MMMFs schemes must invest in money market instruments up-to one year.  It is a highly liquid and risk free investment avenue. Some of the examples are-

  • Aditya Birla Sun Life Money Manager Fund Growth
  • UTI Money Market Growth Fund
  • HDFC Money Market Fund
  • Nippon India Money Market Fund Growth etc.

Characteristics of MMMFs

  1. It is a short term mutual fund investment scheme.
  2. MMMF is an open ended mutual fund scheme where the investors are free to enter the scheme and exit from the scheme at any time.
  3. It is a highly liquid investment opportunity.
  4. Money market instruments like treasury bills, commercial papers, certificate of deposits, repo, commercial bills are eligible for making investment. 
  5. It is suitable for retail investors to access the money market conveniently.

Advantages of Money Market Funds

  1. Low/Moderately Low Risk: 

Money market mutual funds involve less risk because investments are made for a short period. Moreover, investors are able to sell the investment or exit from the investment at any time because such investments are highly liquid.

  1. Easy access to money market: 

Retail investors are unable to access the money market because of the high cost of money market instruments. Money market mutual funds enable convenient access to a range of money market securities. It collects the small savings from retail investors and collectively invests it in   the money market. 

  1. Steady Returns: 

Money market funds generate steady returns through cycles of interest rate tightening and easing, because fund values do not change much in response to changes in market rates. When market rates rise, the funds earn mainly through higher interest income. When market rates decline, they make up for lower interest income by generating capital gains.

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