Information about Money Market Funds
Money funds (or money market funds, money market mutual funds) are mutual funds that invest in short-term debt instruments.
Money market funds seek a stable $1.00 Net Asset value (NAV). Since the 2a-7 rule has been adopted only one fund "broke the buck" in 1994, paying investors $0.96 per share. The fund that failed was called the Community Bankers U.S. Government Fund and it had invested a large percentage of its assets into adjustable rate securities. As interest rates increased, these floating rate securities lost value.
Eligibile money market securities include commercial paper, repurchase agreements, short-term bonds or other money funds. Money market securities must be highly liquid, and have a stable value.
Outside of the U.S., the first money market fund was set up in 1968 and was designed for small investors. The fund was called Conta Garantia and was created by John Oswin Schroy. The fund's investments included low denominations of commercial paper.
The largest institutional money fund is the JPMorgan Prime Money Market Fund, with almost $100 billion in assets as of Dec. 31, 2006. Among the largest companies offering institutional money funds are BlackRock, Federated, Columbia (Bank of America), Dreyfus, AIM and Evergreen (Wachovia).
Retail money funds invest in short-term debt, such as US Treasury bills and commercial paper, come in a few different breeds: government-only funds, non-government funds and tax-free funds. You will get a slightly higher yield in the non-government variety, which will invest in high-quality commercial paper and other instruments. Money funds for individuals are currently yielding just over 5.0%. However, instruments of the United States Government are usually exempt from state income taxes.
The largest money market mutual fund is Fidelity Investments' Cash Reserves (FDRXX), with assets exceeding $88 billion. The largest retail money fund providers include: Fidelity, Vanguard, and Schwab.
Explanation
Money market funds, also known as principal stability funds, seek to limit exposure to losses due to credit, market, and liquidity risks. Money market funds are regulated by the U.S. Securities and Exchange Commission's (SEC) Investment Company Act of 1940. Rule 2a-7 of the 1940 act restricts investments in money market funds by quality, maturity and diversity. Under this act a money fund mainly buys the highest rated debt which matures in under 13 months. The portfolio must maintain a Weighted Average Maturity (WAM) of 90 days or less and invest up to 5% in any one issuer, with the exception of government and repurchase agreement securities.Money market funds seek a stable $1.00 Net Asset value (NAV). Since the 2a-7 rule has been adopted only one fund "broke the buck" in 1994, paying investors $0.96 per share. The fund that failed was called the Community Bankers U.S. Government Fund and it had invested a large percentage of its assets into adjustable rate securities. As interest rates increased, these floating rate securities lost value.
Eligibile money market securities include commercial paper, repurchase agreements, short-term bonds or other money funds. Money market securities must be highly liquid, and have a stable value.
Money market accounts
Banks in the United States offer savings and "money market deposit accounts", but these shouldn't be confused with money market mutual funds. These bank accounts offer higher yields than traditional passbook savings accounts, but often with higher minimum balance requirements and limited transactions. A money market account may refer to a money market mutual fund, a bank money market deposit account (MMDA) or a brokerage sweep free credit balance.History
In 1971, Bruce R. Bent established the first money market fund in the U.S. The Reserve Fund was offered to investors who were interested in preserving their cash and earning a small rate of return. Today, almost 2,000 money funds are in operation, with total assets of over $2.3 trillion dollars.Outside of the U.S., the first money market fund was set up in 1968 and was designed for small investors. The fund was called Conta Garantia and was created by John Oswin Schroy. The fund's investments included low denominations of commercial paper.
Institutional money fund
Institutional money funds are high minimum investment, low expense share classes which are marketed to corporations, governments, or fiduciaries. They are often set up so that money is swept to them overnight from a company's main operating accounts. Large national chains often have many accounts with banks all across the country, but electronically pull a majority of funds on deposit with them to a concentrated money market fund.The largest institutional money fund is the JPMorgan Prime Money Market Fund, with almost $100 billion in assets as of Dec. 31, 2006. Among the largest companies offering institutional money funds are BlackRock, Federated, Columbia (Bank of America), Dreyfus, AIM and Evergreen (Wachovia).
Retail money funds
Retail money funds are offered primarily to individuals with moderate-sized accounts. Their primary use is as temporary holding funds at stock brokerage firms. Retail money market funds hold roughly 40% of all money market fund assets.Retail money funds invest in short-term debt, such as US Treasury bills and commercial paper, come in a few different breeds: government-only funds, non-government funds and tax-free funds. You will get a slightly higher yield in the non-government variety, which will invest in high-quality commercial paper and other instruments. Money funds for individuals are currently yielding just over 5.0%. However, instruments of the United States Government are usually exempt from state income taxes.
The largest money market mutual fund is Fidelity Investments' Cash Reserves (FDRXX), with assets exceeding $88 billion. The largest retail money fund providers include: Fidelity, Vanguard, and Schwab.
See also
External links
- Money Fund Intelligence - news, yields, and basics about money market funds and cash investing
- Frequently Asked Questions About Money Market Funds
- Money-rates.com Money Fund Report
- TheStreet.com: Dear Dagen: Where Can I Park My Money for Nine Months?
- Money Fund Links and Resources from Crane Data
- Bank Deals Blog
- New Finance Deals: Money Markets and Savings Account (aggregator)
mutual fund is a professionally-managed form of collective investments that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities.
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money market is the global financial market for short-term borrowing and lending. It provides short-term liquid funding for the global financial system. The money market is where short-term obligations such as Treasury bills, commercial paper and bankers' acceptances are bought and
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SEC or Sec or Seč can refer to:
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General
- sec., abbreviation for second, the name of a unit of time
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- Supreme Eiye Confraternity (AIRLORDS) http://www.airlords.
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The Investment Company Act of 1940 is an act of Congress. It was passed as a United States Public Law and is codified at through .
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Background and purpose
Following the founding of the mutual fund in 1924, investors welcomed the new investment vehicle with open arms and..... Click the link for more information.
Security is the condition of being protected against danger or loss. In the general sense, security is a concept similar to safety. The nuance between the two is an added emphasis on being protected from dangers that originate from outside.
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Commercial paper is a money market security issued by large banks and corporations. It is generally not used to finance long-term investments but rather to purchase inventory or to manage working capital.
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Repurchase agreements (RPs or repos) are financial instruments used in the money markets and capital markets. A more accurate and descriptive term is Sale and Repurchase Agreement, since what occurs is that the cash receiver (seller) sells securities
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bond is a debt security, in which the authorized issuer owes the holders a debt and is obliged to repay the principal and interest (the coupon) at a later date, termed maturity.
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Bruce R. Bent is known for inventing the world's first money market fund, The Reserve Fund, in 1970. This financial product was recognized by the American Museum of Financial History, an affiliate of the Smithsonian Institution, for its importance and impact on the nation's
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asset is meant probable future economic benefits controlled by an entity as a result of past transactions or events and from which future economic benefits may be obtained.
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money market is the global financial market for short-term borrowing and lending. It provides short-term liquid funding for the global financial system. The money market is where short-term obligations such as Treasury bills, commercial paper and bankers' acceptances are bought and
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Commercial paper is a money market security issued by large banks and corporations. It is generally not used to finance long-term investments but rather to purchase inventory or to manage working capital.
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Fidelity Investments
Private company
Founded Boston, USA
Headquarters Boston, USA (FMR),
Bermuda (FIL)
Key people Edward "Ned" C. Johnson 3rd, Chairman of the group
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Private company
Founded Boston, USA
Headquarters Boston, USA (FMR),
Bermuda (FIL)
Key people Edward "Ned" C. Johnson 3rd, Chairman of the group
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Vanguard
Client owned
Founded Valley Forge, Pennsylvania (1975)
Headquarters Malvern, Pennsylvania, USA
Key people John J. Brennan, Chairman & CEO; John C.
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Client owned
Founded Valley Forge, Pennsylvania (1975)
Headquarters Malvern, Pennsylvania, USA
Key people John J. Brennan, Chairman & CEO; John C.
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The Charles Schwab Corporation
Public (NASDAQ: SCHW )
Founded California (April 1971, as First Commander Corporation)
Headquarters 101 Montgomery Street, San Francisco, California
Key people Charles R.
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Public (NASDAQ: SCHW )
Founded California (April 1971, as First Commander Corporation)
Headquarters 101 Montgomery Street, San Francisco, California
Key people Charles R.
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money market is the global financial market for short-term borrowing and lending. It provides short-term liquid funding for the global financial system. The money market is where short-term obligations such as Treasury bills, commercial paper and bankers' acceptances are bought and
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worldwide view of the subject.
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* Its tone or style may not be appropriate for Wikipedia.
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A sweep account is an account set up at a bank or other financial institution where the funds are automatically managed between a primary cash account and secondary investment accounts.
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