A money market mutual fund is an interest-bearing account established through a mutual fund company that focuses on short-term securities with low risk. It requires a minimum balance and allows for regular withdrawals and electronic transfers. It can be accessed through an employer or a broker.
Sometimes referred to as an MMMF, a money market mutual fund is an interest-bearing account established through a mutual fund company. Often, such an open-ended mutual fund focuses on investment activity that includes buying and selling short-term securities to make a profit for investors. Interest or dividends earned from the account can be regularly withdrawn by the investor or used for additional investment activities associated with the fund.
In most cases, participation in a money market mutual fund requires some type of minimum account balance to be maintained at all times. If the account balance falls below that minimum, some funds will allow the investor a short grace period to build up the balance by placing more money in the account. Depending on the structure of the fund, the investor may not be eligible to earn dividends on stock activity until the minimum balance is reset, but that is not necessarily the case.
A money market mutual fund will focus on securities that can generate a return in a relatively short period of time. To some extent, funds of this type also tend to go with investment opportunities that carry a low probability of risk. Some examples of investment options used by a money market mutual fund include commercial paper, government-issued Treasury bills, and bankers’ acceptances.
With many money market funds of this type, the investor has the opportunity to use the balance in the account by writing checks that are drawn on the account. Today, it is also possible to electronically transfer a portion of the balance to other financial accounts, such as a checking or savings account. The wire transfer process can actually work both ways, allowing an investor to transfer money into the money market mutual fund to increase the balance and earn a greater amount of return from the fund’s activity.
A money market mutual fund may be available through an employer. When this is the case, participants may contribute to the fund through payroll deduction. When a money market mutual fund program is not available through an employer, it is still possible to work with a broker or financial manager to identify and join such a fund.
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