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What is a money market fund?

Money Market Fund

It's an open-ended mutual fund  that invests in short-term debt securities  such as US Treasury bills . Money market funds are important providers of liquidity to financial intermediaries, and are widely regarded as being as safe as bank deposits - though this isn't always the case.

Where have you heard about money market funds?

Money market funds are widely followed in the financial press. They tend to see higher inflows at times of uncertainty - this was certainly the case at the end of July 2017, as this report explains.

What you need to know about money market funds.

In the US, money market funds are regulated by the Securities and Exchange Commission  under the Investment Company Act 1940 . Money funds mainly buy the highest rated debt, which matures in under 13 months.

The portfolio has to maintain a weighted average maturity  of 60 days or less, and not invest more than 5% in any one issuer - except government securities  and repurchase agreements .

Money market funds seek a stable net asset value  of $1 per share, and they aim to never lose money. Funds have only rarely 'broken the buck' (seen their net asset value per share drop below $1).

Find out more about money market funds.

Take a look at our guides to mutual funds  and debt securities  to discover more about this area of investing.

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