Money market funds refer to funds that invest in short-term securities in the money market. The assets of the Fund are mainly invested in short-term monetary instruments, such as treasury bills, commercial paper, bank time deposit certificates, government short-term bonds, corporate bonds and other short-term securities. So what is a money market fund? Let's have a look!
1. What is a money market fund?
It refers to an investment fund that invests in short-term (within one year, with an average term of 120 days) securities in the money market. The assets of the Fund are mainly invested in short-term monetary instruments, such as treasury bills, commercial bills, bank time deposit certificates, bank acceptance bills, government short-term bonds, corporate bonds and other short-term securities. There is only one way for money funds to pay dividends-dividends are transferred to investment. Each money market fund is always maintained at 1 yuan. If it exceeds 1 yuan, the income will be automatically converted into fund shares on time, and you will have as many assets as you have fund shares. Other open-end funds have fixed shares and accumulated net unit value, and investors can only rely on the annual dividends of the fund to realize their income.
Second, the advantages and characteristics of money market funds
superiority
Money market funds not only have the characteristics of stable income, strong liquidity, low subscription limit and high capital security, but also have other advantages, such as issuing checks and paying consumer bills with fund accounts; It is usually used as a place to temporarily store cash before making new investments, which can earn more income than demand deposits and can be withdrawn for investment at any time. Some investors subscribe for money market funds in large quantities and then gradually redeem their investment stocks, bonds or other types of funds. Many investors also hold cash in the form of money market funds for emergencies. Some money market funds even allow investors to withdraw funds directly from ATMs.
trait
1. The main difference between money market funds and other funds that invest in stocks is that the net asset value of each fund unit is fixed, usually 1 yuan per fund unit. After investors invest in this fund, they can reinvest with the proceeds, and the investment income will accumulate continuously to increase the fund share owned by investors.
2. The standard to measure the performance of money market funds is the rate of return, which is different from other funds that gain income through the appreciation of net assets.
3. Good liquidity and high capital security. These characteristics are mainly due to the fact that the money market is a low-risk and high-liquidity market. At the same time, investors can transfer the fund shares at any time as needed, regardless of the maturity date.
4. Low risk. The term of money market instruments is usually very short, and the average term of money market fund portfolio is usually 4-6 months, so the risk is low, and its price is usually only affected by market interest rate.
5. The investment cost is low. Money market funds usually do not charge redemption fees and have low management fees. The annual management fee of money market funds is about 0.25%~ 1% of the fund's net asset value, which is lower than the traditional annual management fee 1%~2.5%.
6. Money market funds are all open-end funds. Money market funds are usually regarded as risk-free or low-risk investment tools, which are suitable for short-term capital investment to earn interest in case of emergency, especially in the case of high interest rate, high inflation rate, reduced liquidity of securities and reduced credibility, which can prevent the loss of principal.
What is a money market fund
The so-called money market fund refers to the mutual fund investment mode that fund management companies invest the raised funds in the money market as the portfolio field and object by selling fund shares. Money market instruments invested by money market funds include short-term bonds (including central bank bills), bank certificates of deposit, repurchase agreements, large negotiable certificates of deposit, bank acceptance bills or other short-term debt-based financial instruments with good liquidity, with a term of less than one year. Governments, commercial banks or other financial institutions and enterprises with high credit ratings are the issuers of these money market instruments. Therefore, money market instruments have the characteristics of high liquidity and low risk. The money market has the characteristics of wholesale market, and the amount of a single transaction is huge, with millions at every turn, so it is difficult for individual investors to participate in investment. By raising small personal funds, organizing mutual funds and establishing money market funds, individual investors can participate in money market investment activities while maintaining personal investment liquidity and enjoy certain investment income.
Compared with other forms of investment, money market funds have the following basic characteristics:
(1) Money market funds are open-end investment funds specializing in money market instruments, with relatively stable returns and relatively small risks. Money market funds have the general organizational form and basic characteristics of * * * mutual investment funds. However, money market funds are short-term and highly liquid investment funds. Investors can increase their investment at any time, and they can also withdraw from the fund by issuing checks at any time, which is more flexible than ordinary * * * mutual investment funds. Compared with stock market funds and ordinary bond funds, money market funds fluctuate less, so the capital gains generated by the portfolio of money market funds are not large and the gains are relatively stable. As money market funds collect a large amount of small funds and invest in less risky money market instruments, liquidity complementation is achieved through scale combination, thus reducing the risk of investing in money market funds to a negligible level.
(2) The face value of fund shares is fixed. In order to provide quasi-currency liquidity and convenience for investors, money market funds generally keep the transaction price of each fund unit unchanged, such as 1 yuan/fund unit, and establish corresponding asset valuation and accounting models according to the international practice of short-term capital market investment funds. The Fund calculates the fund's income every day, and regularly transfers the gains and losses confirmed by the fund investment to the fund holder's account in the form of shares, and reflects the changes of the fund holder's income through the increase and decrease of shares. Holders can get cash benefits by redeeming fund shares and issuing checks.
(3) The net book value of the fund deviates from the actual value. The actual value of the fund is determined by the market price of the money market instruments it invests in, that is, the market interest rate, and the fluctuation of interest rate will lead to the change of the actual value of the fund. If the market value of the fund is taken as the net book value, it is not conducive to the cash management of investors. In order to reduce the fluctuation of the net book value of money market funds, fund managers generally adopt amortized cost method. At the initial investment of the fund, the actual cost of purchasing money market bonds is taken as its net book value, and the excess and discount of investment are amortized during the remaining period of bonds, thus increasing or decreasing the net book value of the fund. Using this method, in the eyes of investors, it is similar to investing in a stable principal and getting a certain interest income every period.
What is a money market fund
Each fund is always maintained at 1 yuan. If it exceeds 1 yuan, the income will be automatically converted into fund shares on time, and you will have as many assets as you have fund shares. Other open-end funds have fixed shares and accumulated net unit value, and investors can only rely on the annual dividends of the fund to realize their income. There are several money market funds in the market, such as Hua 'an cash income, Bosera cash income, China Merchants cash appreciation, South China cash increase and Huaxia cash increase.
Money market funds not only have the characteristics of stable income, strong liquidity, low subscription limit and high capital security, but also have other advantages, such as issuing checks and paying consumer bills with fund accounts; It is usually used as a place to temporarily store cash before making new investments, which can earn more income than demand deposits and can be withdrawn for investment at any time. Some investors subscribe for money market funds in large quantities and then gradually redeem their investment stocks, bonds or other types of funds. Many investors also hold cash in the form of money market funds for emergencies. Some money market funds even allow investors to withdraw funds directly from ATMs.