Originally posted on September 8, 2017, updated on 24.11.2023
Money market mutual funds (MMMFs) are mutual funds that exclusively invest in short-term debt instruments, cash, and cash equivalents that are rated high quality. It is for this reason that money market mutual funds are considered safe investments with minimal to low risk. As these funds invest in high-quality instruments, they offer a predictable risk-free return rate.
A money market mutual fund tries to offer the highest short-term income by maintaining a well-diversified portfolio of money market instruments. Investors having a short investment horizon of up to one year may invest in these funds. These schemes tend to give better returns than Bank Fixed Deposits of similar duration
The scheduled commercial banks and the general mutual funds or their subsidiaries engaged in funds management may set up MMMF either as Money Market Deposit Accounts or Money Market Mutual Funds with the permission of RBI. The private mutual funds that have floated separate Asset Management Companies are under SEBI regulations if they deal in capital market instruments.
The resource mobilized by MMMFs is permitted to invest up to the maximum level in the following money market instruments.
Money Market Mutual Funds (MMMFs) enable individual investors to participate in the money market. The above limits are fixed with a view to ensuring safety and liquidity for individual investors.
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