An open-end mutual fund which invests only in money markets. These funds invest in short term (one day to one year) debt obligations such as Treasury bills, certificates of deposit, and commercial paper. The main goal is the preservation of principal, accompanied by modest dividends.Money market mutual funds offer minimal risk and higher return investment than traditional savings accounts. Many choices are available including international trade, which opens the door for profitable investment even if the local economy is not doing well. As with any trade there are risks, however, the severity of loss depends on the intended use of the money being invested. Responsible budgeting and savings creates the environment for less stressful risks taken with index mutual funds.
Unlike other types of funds, check-writing options are available as early as one business day after request. A responsible investor tracks spending and possibly requests a restriction on the amount available for check-writing. If the economy is good, then using only the interest earned is a wise move because the funds invested is never touched. However, not everyone’s situation allows for this much flexibility. Due to the flexibility of index mutual funds, some people use this avenue as a place to store their money before spending it on another long-term vehicle such as an aggressive equity.
Finding the availability in a budget to confidently use this type of investment may take careful planning as well as strict budgeting. Knowing limits on how much money is available to spend will depend on the ratio between absolute monthly bills and average monthly income. Though index mutual funds do not require a minimum monthly contribution, other investments do, therefore; planning for emergencies in the regular budget is necessary to keep up on these high return investments. One common example of regular contribution investing is an IRA. Some sources for investing include using inheritance or extra capital available through bonuses, gifts, or a side job.
Accessing this type of investment can only be accomplished through a financial advisor at a bank or other financial institution. Many different big companies offer services which includes setting up certain investments for trading over the phone. Understanding the fees paid for each transaction as well as time spent talking with the financial advisor will help determine the best financial move for a particular situation. People with a significant amount to invest may opt for a more expensive advisor due to the elevated risk of investment, which represents the quality of advisor. People with smaller amounts to invest may opt to find the most economical option at first and conduct a lot of research on their own to save some money. The question then becomes ‘At what point is my time worth more than I can pay someone else to do this?’
One of the biggest advantages to index mutual funds is the minimal requirement for watching the market on a day-to-day basis. Because this type of investment is earned on an average with value between numerous stocks put together, it is not necessary to spend a lot of time researching and conducting daily evaluations. Therefore, these types of investments are good for novice investors or people who do have time or interest in watching the market, but want to be involved with investing. Due to the low, but safe, return on money market mutual funds people tend to invest less here and more in high risk funds. When seeking out a financial advisor, he may not mention these types of funds due to the low commission they will earn. Because money invested this way is virtually independent, there is not a lot of money for advisors to make. Prioritizing motives for investment leads to wise choices in the long run. Emotional and nervous investors many times choose the wrong investments resulting in the lowest return. These actions lead to lower profits, but more importantly worse choices in the future trying to make up for initial losses. History does not lie, therefore sticking with what has proven to work for the majority of investing proves most profitable. Though these types of investments are safer than most other choices, mistakes can still be made on certain accounts and timing for trade. Consulting an honest professional while fully understanding trends and history leads to smarter investing.
Just as a budget requires certain available funds for house or rent payments, money market mutual funds require independence in order to adequately make the profit desired. If the capital put into these accounts is required for survival and used on a regular basis, and then its earning power lessens dramatically. Choosing the right amount to invest or move over to this type of fund is crucial for financial success as well as managing stress level in relation to investing. Though index mutual funds can be a long-term investment in certain circumstances, it is most common to use this route as a holding tank while waiting for other investment opportunities, which makes the money available for use. Strict discipline may be required in order to refrain from using this capital before finding the right investment opportunity especially if the market does not provide profitable currently.