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By knowing what money market funds are and how to use them for investment, you can make better investment decisions, protect your assets and gain more long-term returns.
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Money market public fund is a kind of public fund used for asset investment. It is very stable, and its price is always maintained at $1 per share. Money market funds are not guaranteed by FDIC (although some banks provide savings accounts, or even verification accounts with the name of “money market”, they are only guaranteed by FDIC and do not belong to mutual funds).
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Invested funds flow into the money market. These investments include categories that consumers and small investors do not usually buy directly. Among them: short-term treasury debt (treasury bonds) and commercial paper (short-term corporate debt). Any component of the money market fund portfolio is believed to mature in a few months. The cash is then reinvested.
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Money market funds have low returns and are generally considered safe despite the lack of formal guarantees. The industry is strictly regulated and investors’ losses are small. You have reason to expect to gain profits with capital and interest.
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When most investors make long-term investments, they will choose three assets: stocks, bonds and cash. Through public funds, investment in all three assets can be realized. If your current public fund is used to invest in stocks and bonds, you should also invest cash through public funds. Various public funds can be held through a brokerage account.
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Since various cash investments, including money market funds, cannot generate much interest or dividends, and the value of cash investment will not rise, this is not a good investment. But the more time people are going to retire, the more they like to turn some of their investments into cash. Although it reduces the expected return of the portfolio, it also reduces the risk of loss.
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It is usually wise to deposit cash into money market funds before and after investment. For example, you invest $20000 in IRA through a large discount brokerage. You may have invested in several public funds and still have some money left. Or, you sell a public fund and want to take some time to choose a new fund investment. At this time, you can invest in money market public funds, so that your cash is safe and will not be completely idle.
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Even if you do not apply, some brokerage companies will automatically convert your cash into money market funds. Other brokerage firms will ask if you are willing to automatically convert cash into money market funds. Some brokerage firms only ask for the consent of large clients. Even if you can’t transfer all the funds to the money market account, you can also transfer some of the money to the money market fund, just as you can transfer the money to the public fund for stocks and bonds.
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As the income of public funds in the money market is very small, unless you invest a lot of money, you must ensure that no transaction fees will be levied. Now, if you invest 1000 dollars to buy money market funds, you may earn only 10 dollars a year. If you first spend $10 to enter the money market investment fund and then spend $10 to exit, you will lose even $10. At this time, it is better to leave your cash idle for a year without any profit.
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The money market public fund is a key link in the investment strategy. Although it is impossible to invest a lot of money in money market funds, it is often necessary to invest a certain amount of money.
- 1 According to the instructions of the Securities and Exchange Commission (SEC), the expenses of American mutual funds can be divided into two parts. The first part is the expenses related to shareholders, including the selling expenses arising from subscription/subscription (also known as Load, divided into front-end and back-end, usually paid to sales agencies), redemption fees, conversion fees (conversion between funds under the same company), account management fees (some companies have), And purchase fees (usually paid to fund management companies); The second part is annual operating expenses, including management fees, sales and service fees, i.e. 12b-1 fees, and other fees, including custody fees, financial fees, legal fees, etc. 12b-1 fees are mainly used to compensate the financial consultant or sales agency for expenses incurred in fund promotion, printing and sending prospectus, and printing and sending leaflets. The precondition for payment is that the fund management agency has participated in the 12b-1 plan at the time of fund issuance,
- 2 Jiaxin Financial Group: Charles Schwab is a financial service company headquartered in San Francisco. Founded 30 years ago, it has become a leader in the personal financial service market in the United States.
- Fidelity Investment Group: Founded in 1946, its founder is Edward C. Johnson II, and its headquarters is located in Boston, USA. It is the first fund management company to launch the “money market mutual fund account”.
- 4 TD Ameritrade: TD Ameritrade is an online brokerage company in the United States, with 6 million customers in the United States.
- 5 Family Share: Family Share is a media website dedicated to family life exploration.