Investing in money market mutual funds is considered to be a low risk investment. Money market mutual funds are low risk funds that invest in money market instruments such as treasury bills, commercial papers, and certificates of deposits. These investment are less volatile than the stock market and can balance out more aggressive investment.
What is commercial paper? Commercial paper is a short-term debt instrument that is issued by large corporations to cover cash needs. It is issued at a discount, usually in denominations of at least $100,000. Institutional invest such as mutual funds and insurance companies are the primary buyers of commercial paper.
The main benefit of Investing in money market mutual funds is that they can provide a steady stream of income. These investment provide a high rate of return with minimal risk. The funds are also highly liquid, which means they can be exchanged for cash easily, with little or no loss of value.