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Money Mutual Funds Are Safe Havens For Investments

A money mutual fund, also known as a money market fund, is a conservative type of investment which includes holdings in Treasury bills and other securities. This type of fund is attractive to certain investors who are more interested in preserving their investment than in making it grow substantially. They are preferred to savings accounts and other bank deposits because they produce a higher yield even if the profits earned are meager compared to the possibilities with higher risk stocks and commodities.

History

This fund was first established in 1968. The first such fund offered to the public was called the Conta Garantia. In 1971, the first money mutual fund appeared in the United States. They have always been less used in Europe due to regional regulations which encourage investors there to rely on banks rather than mutual funds for short-term deposits.

Net Asset Value

Money mutual funds are designed to maintain a stable net asset value (NAV). The desired NAV is usually set at $1.00 USD. Only on three occasions, prior to 2008, did any funds see their NAV drop below that level. These were the only occasions in which such investments lost money. That year did bring about an unusual rate of loss on money mutual funds and other investments.

Types of Funds

There are several different types of funds that operate like this. Similar investments include ultrashort bond funds and enhanced cash funds. Two of the most common types are institutional money funds and retail money funds.

There are a number of other funds with similar goals. In times as volatile as these, they are very attractive to many investors. While they do not offer much in the way of profits, they do provide a safe refuge for money.

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