Money market funds and how they are beneficial for you
Are you thinking of investing in a money market fund in India? If the answer is yes, then you should learn more about the nature and type of these funds. They are placed in the debt mutual fund segment and open-ended with high possibilities of earning handsome returns in the near future. Historically, these are funds which have been one of the best options for investments and also for building up savings in the short-term. The maturity periods are usually up to a year or so.
When it comes to money market mutual funds India, there are various types worth considering in this regard. Various instruments with high liquidity can be found including T-Bills or Treasury Bills which are short-term government securities and bonds. The RBI usually issues these bills periodically at discounted rates and they can be redeemed at their face value during the time of maturity. There are repurchase agreements which are released for controlling money supply and involves sale of any deal at a particular price and purchasing it at a price which is higher in the future. Then there are commercial papers issued by primary dealers, corporates and several financial institutions in the country. They issue commercial papers majorly in unsecured financial instruments. These papers are issued via promissory notes.
Certificates of deposit are agreements where money is deposited into a bank for a fixed duration. The bigger the deposit period, the higher will be the commitment in terms of rates of interest. You should keep an eye out for the best money market funds India that are currently available. Those with sizable bank account savings and a desire for investing the same should invest in a money market fund along with those seeking out low-risk choices with higher potential for earning future returns and also those who are retail or corporate investors.
Key advantages offered by these funds
These funds come with several advantages for investors. They are ideal for those with lower tolerance for risks and a desire to earn higher returns than keeping money locked up in a savings bank account. The AMC or asset management company will make sure that there are limited risks for the investment while securing your interests throughout the period of investment. As compared to several other alternatives, these funds come with higher returns although they are dependent upon the NAV or net asset value that will keep changing with fall/rise in rates of interest of units.
In case the interest rate comes down, then the price of money market fund unit will go up and you will receive attractive returns likewise. In simpler terms, you can usually get your money withdrawn within some business days and it is quite convenient since you get the sheer flexibility of withdrawing money from the money market fund in question. This will help you easily access cash whenever you desire the same. You should invest money in financial instruments with lower risks instead of saving it in the bank account. It will not be an ideal investment option if you desire starting a medium to long-term goal for investment. You should get more details and do your homework prior to investing.
