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Finance: What is a Money Market Fund? 80 Views
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What is a Money Market Fund/Commercial Paper? Money Market Funds are mutual funds that are very safe and liquid. They invest in cash and securities with short-term maturities. Commercial paper is similar in that it has the short-term aspect. It is different because it’s issued by companies and used to take care of various financial obligations in the short term, or to buy inventory.
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Transcript
- 00:00
finance a la shmoop. what is a money market fund? isn't it a strange concept
- 00:08
to think about going to a market to buy money? [man walks through grocery store]
- 00:12
well yeah it's strange but the practice exists and it's a huge multi trillion
- 00:17
dollar market today. the key word here is money and not investment. why such a big
- 00:23
diff? well because the notion of investing implies duration. that is when
Full Transcript
- 00:28
you invest in a nice fixer-upper home or a tractor distribution company or shares
- 00:34
in a fat dividend-paying bank you're investing for presumably a long time [people stand in line]
- 00:40
like years maybe decades maybe centuries if you can find the right miracle pill.
- 00:44
but here we're talking about money like the stuff you can buy candy with. so it's
- 00:49
short term not long and a money market fund basically comprises many series of
- 00:55
pretty safe bonds that are all coming due in the next 30 to 90 days. sometimes [pie chart]
- 01:00
longer than that sometimes shorter but generally in the very near future. so why
- 01:04
would you care about a money market fund? well because it pays you slightly more
- 01:09
interest on your money than say a bank checking account. and lots of people in
- 01:13
corporations need cash just sitting around to pay their bills, so there are
- 01:18
tons of money market funds out there available and that's the gist of a money
- 01:21
market fund. we're sure you'll have plenty of experience with them by the
- 01:25
time you hit your sixth hundredth birthday day [people cheer and hold birthday cake]
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