Investors have different options pool of investment funds, including mutual funds and money market funds that can meet short term and long term investment goals. Individuals who invest in mutual funds to accept a higher degree of risk since the mutual Fund managers to invest in long-term securities, such as stocks and bonds. Mutual money market funds focused on preserving principal, and the Fund managers to invest in short-term Treasury securities to achieve this goal. Mutual funds and money market funds also differ in terms of the cost of sales of goods.
Individuals who purchase mutual funds combine your money with other investors to purchase shares of, securities, including corporate stocks, bonds, releases of municipal bonds or government securities. Mutual funds strive to beat the market by active investment management strategies in the Fund, as well as a team of professional Fund managers manages each Fund.
Because the funds active management, the costs associated with investing in mutual funds. Most mutual funds carry a sales load or at the time of purchase or when shares are redeemed, which is used to compensate the Manager and the consultant or broker who recommended the investment. The funds also have expense ratios, which cover advertising, administrative and other support costs received by the Fund, which may be higher than the costs of passive investments.
Money Market Funds
Money market funds are a subset of mutual funds. While mutual funds invest in longer-term securities money market funds restricted investments in treasuries and other low-risk, liquid investments. Money market accounts tend to keep the net asset value of the shares at $1, creating a steady but relatively low returns for investors.
The expense ratios are low for money market accounts because they are not as actively managed as equity or fixed income investment funds. Similarly, sales loads for the purchase of funds are either low or nonexistent. Money market funds are often used as a holding account for funds in the near future will be invested, or for money received from the sale or redemption of securities.