money-market fund

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Related to money-market fund: Money market mutual funds

money-market fund,

type of mutual fundmutual fund,
in finance, investment company or trust that has a very fluid capital stock. It is unique in that at any time it can sell or redeem any of its outstanding shares at net asset value (i.e.
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 that invests in high-yielding, short-term money-market instruments, such as U.S. government securities, commercial papercommercial paper,
type of short-term negotiable instrument, usually an unsecured promissory note, that calls for the payment of money at a specified date. Because it is not backed by collateral, commercial paper is usually issued by major firms whose credit-rating is so good
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, and certificates of deposit. Returns of money-market funds usually parallel the movement of short-term interest rates. Some funds buy only U.S. government securities, such as Treasury bills, while general-purpose funds invest in various types of short-term paper. They became enormously popular with investors in the early 1980s because of their high yields, relative safety, and high liquidity. Investment in money-market funds soared from $20 billion in the late 1970s to over $150 billion in the early 1980s. Much of the growth came at the expense of banks and thrift institutions. With the recession of the late 1980s and early 1990s, interest rates (and, temporarily, the popularity of the funds) dropped. By 2008, some $3.5 trillion was invested in U.S. money-market funds when concerns about real and potential investment losses as a result of the global financial crisis led to sizable withdrawals from the funds; as a result, the Treasury dept. temporarily guaranteed the funds against losses.
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Money-market funds (MMFs) have had no shortage of attention since 2008, when the Reserve Primary fund broke the buck in the wake of Lehman's collapse, leading to a run on money funds in the United States.
While many in the industry feel these changes have bolstered the resilience of money-market funds and addressed the issues highlighted by the financial crisis, there is much more to come.
Many advisers believe that you cannot have a money-market fund in the plan that directly competes with the stable value fund.
The reality is that equity wash restrictions protect stable value participants by preventing participants from arbitraging between stable value funds and money-market funds, he says.
For many investors, the most attractive feature of an asset management account is the "sweep." This is where all accumulated interest, dividends or proceeds from the sales of securities are swept into the selected money-market fund. So, the money in the account is reinvested continuously.
So, if you had $50,000 worth of General Motors (GM) stock and $5,000 in money-market funds, but you've decided to buy a $22,000 Jeep Cherokee, the check would clear and a debit would be created in the account against the value of the GM stock.
The average weighted maturity of the 100 largest money-market funds was 47 days in August 2008, and then dipped to 43 days for two months, according to Crane.
An investment strategy predicated on Treasury bills and money-market funds may have produced high yields in the 1980s, but with current yields on these issues now so low, you may find it pays to be more creative.
Most of the rise in mutual fund sales resulted from inflows into money-market funds, says Jacob S.
JPMorgan, which is one of the world's biggest providers of money-market funds, said it would not welcome cash in five of its euro money market and liquidity funds.
* Money-Market Funds: From double-digit returns a couple of years ago, money-market funds yields have tumbled to an average of 5.4%.