Money market funds

The money market is usually a part of the financial market that is only used by institutional partners and large companies. It is mainly used for short-term liquidity balancing for companies and state actors. However, money market funds also allow private investors to invest in the money market. Thus, these funds can be an alternative to traditional investments such as time deposits or overnight money.

Traditionally, large investors such as governments, banks or large companies use money market funds to invest capital that has become available in the short term. Generally, money market funds are referred to as "credit intermediaries".

Since the funds are available on every trading day, the capital is not tied up for the long term. Companies often invest money in money market funds on a short-term basis if the capital is to be invested in acquisitions or corporate restructuring in the near future. In this way, investors can benefit from a return.
Yield on money market funds

In Europe, the interest rate on money market funds depends largely on the key interest rate of the European Central Bank (ECB). If the key interest rate is low, a low return on money market funds can be expected.

At the same time, low interest rates on bonds or other time deposits can also cause the return on funds to fall. Compared to other fund products such as equity funds or currency funds, the return on money market funds tends to be low.

Relatively safe investment

Money market funds are considered to be a relatively safe investment, as the interest normally fluctuates only slightly. Private investors can buy shares in money market funds through a custody account at their bank. In this way they participate indirectly in the money market, which is otherwise only available to institutional investors.

Investing in money market funds can supplement one's own investment portfolio in order to invest freed-up capital in the short term in exness trading exness terminal. This is possible, for example, when a life insurance policy is paid out but the consumer does not yet know how he wants to use the capital further. Due to the low yield, however, money market funds are only suitable as a sole capital investment to a limited extent.

Banks can advise on money market funds

Private customers interested in money market funds can seek advice from their bank. Investors who already have a securities account can invest directly in money market funds.

What are the best money market funds?

The best money market funds are those that offer the highest possible return at the lowest possible risk. Since the interest rate of the respective funds can change on a monthly basis, investors should pay particular attention to the performance of the previous months as well as the development of the return over several years.

In most cases, funds for private investors are not characterised by their short-term nature, but are only worthwhile if the capital is invested over several years. In addition, private investors can also acquire shares in US funds or other international money market funds through their securities account.