How do money market funds differ from other types of mutual funds?
A mutual fund is a corporation or other business entity that uses the money contributed by its shareholders to invest in the securities of many different companies, with the primary goal of increasing capital or providing income. Money market funds differ from other types of funds in that: They invest primarily in short term, high interest bearing certificates issued by government business and/or banks, rather than in stocks and bonds; The average maturity of a money market portfolio is relatively short and fluctuations in asset values are limited; and Many investors channel cash which is temporarily idle into money market funds. Such investors may hold money market funds for a short period of time, and may “invest” and “redeem” several times in the course of a year, a pattern very different from the great bulk of investors in other mutual funds. Money market funds provide an opportunity previously unavailable to investors with limited cash to take advantage of periods of high interest
