4 things to watch while investing in money market funds
If you are looking to park your excess money in the mutual funds, then money market mutual funds are among of the best options to do so.
Money market mutual fund are the open-ended schemes which predominantly invests in ultra-safe and high-quality liquid instruments like treasury bills, commercial paper, certificates of deposits and repurchase agreements, with having less than one-year maturity. The debt funds, fixed maturity plans and gilt funds are some of the options provided by money market funds.
Before investing into these funds there are some factors that investors should look into let us look at those factors.
Asset composition: These funds usually invest in various instruments such as money market instruments, corporate bonds, government securities, cash etc. owing to this, knowing the composition will aid investors in predicting and understanding the strategy of the portfolio manager. So investor should always look into the asset compositions before investing into the money market funds.
Maturity profile: Maturity life is one of the important aspects that investors should look into while investing into the money market funds. The maturity profile represents the maturity of the fund’s portfolio. This helps investors understand the interest rate risk associated with the portfolio in the various money market instruments.
Credit quality: According to the scheme’s investment strategy and objective, these funds invest into the securities with various credit ratings. These credit ratings are considered as the indicators of the creditworthiness of borrowers. So one should always look at the credit quality of the portfolio of the fund.
Track record of the scheme: Even though past performance is not an indicator of the future performance, but it guides the investor while investing into the fund. The scheme with proven performance record usually seems to be good, so investors should always check the past performance record of the scheme before investing.