Saturday, June 11, 2011

Top money market funds

If you are planning to invest your cash in the money market, know first how it works, how much you would earn and what the top money market funds have in store for you.

Money markets are network of banks, credit unions, institutional investors and money dealers who borrow and lend among themselves for a short-term. Money market funds have become popular as cash management tool because of its open-end features.  You earn income in the form of dividends usually on a monthly basis. You can easily get your money back within a short period.  Also, you can keep your money invested that will adjust to the markets while earning rising interest rates.

What you should know.

Be familiar with the different money market funds from the fund’s prospectus. Understand the terms and conditions in their prospectus well.  You may also get these information from the financial institutions. There might be added charges on top of the expense ratio. There are also fees charged to every withdrawal you make. Remember money market funds are investments. As such, it should yield the best from where you put your money.

Money market funds have a value of $1.00 each share. Aim for a money market that protects the full value of your investment at all times. It should earn a dollar for every dollar you invest.

Don’t be deceived by money market funds that are tax free, but give a lower yield for your investment. Some funds give higher yield, however you pay tax for what you gain. Be aware of this feature.

Check on the best rates on money market funds from online listings. There are sites that maintain up-to-date lists of these funds, more particularly considered as the top money market funds.

Be warned too that money market funds are not insured with the Federal Deposit Insurance Corporation (FDIC). There is a risk that you can no longer get back your money if these money markets go bankrupt. Always check the financial standing of the money market where you invested your money. Even before you make the investment, check their liquidity. It is one basic feature of money market funds, you can anytime get back your money.

You, as owner of the money, need to be your own investment chief.  Never assume that investing your money even to one which is considered as among the top money market funds. They are not always safe and risk-free.

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