Reasons to invest in money market funds

why invest in money market fund
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Money market funds offer a relatively stable option to investors for parking their surplus funds. With numerous investment options available nowadays, money market funds are amongst options that stand out as a steady and reasonable choice for investors seeking stability, liquidity, and potentially better returns. Here, we will talk in detail about money market funds, their benefits, who should invest in them and how the new Bajaj Finserv Money Market Fund can be a suitable investment choice for you.

  • Table of contents
  1. What are money market funds?
  2. Benefits of investing in money market funds
  3. Instruments that money market funds invest in
  4. Investing in money market mutual funds is ideal for
  5. Bajaj Finserv Money Market Fund
  6. FAQ

What is a money market fund (MMF)?

At its core, a money market fund (MMF) is a type of mutual fund that primarily invests in short-term, low-risk debt securities. These securities include treasury bills, certificates of deposit (CDs), commercial paper, and other highly liquid, low-risk assets. Therefore, money market funds aim to mitigate the impact on the principal value of investments while providing investors with potentially steady returns.

Additionally, money market funds are professionally managed and regulated, making them a suitable option for both novice and experienced investors.

Benefits of investing in money market funds

Relative Stability: One of the primary reasons investors turn to money market funds is their relative stability. As these funds invest in high-quality, short-term securities with low credit risk, the chances of default are significantly reduced.
Liquidity: Money market funds are designed to be highly liquid. Investors can easily buy and sell units at their net asset value (NAV) on any business day. The liquidity feature allows investors to access their money quickly, making money market funds the preferred choice for emergency funds or short-term cash needs.
Competitive returns: While money market funds are not known for high returns potential, they have in the past provided better investment experience than a traditional savings account with a relatively higher risk. Moreover, the combination of relative stability, liquidity, and reasonable returns makes money market funds an attractive option for investors who seek to balance their growth and risk profiles. However, it must be noted that, unlike a traditional savings account, money market funds are not completely risk-free, as the returns are market-linked.
Diversification:: Money market funds diversify their investments across various short-term instruments and issuers, thereby reducing exposure to individual credit risks. The diversification spreads risk and enhances the overall stability of the fund.

Instruments that money market funds invest in

Money market funds invest in a variety of short-term debt instruments. Some of the common instruments include:

Treasury bills (T-Bills): These are short-term debt obligations issued by governments to finance their spending needs. T-Bills are considered one of the most stable investments since they are backed by the government.
Certificates of deposit (CDs): CDs are time deposits offered by banks with fixed maturity dates and fixed interest rates.
Commercial paper: CDs are time deposits offered by banks with fixed maturity dates and fixed interest rates.
Repurchase agreements (Repos): Repos are short-term agreements as part of which money market funds purchase securities from banks or financial institutions with an agreement to sell them back.

Investing in money market mutual funds is ideal for

Emergency Funds: An emergency fund is crucial for handling unexpected expenses or financial hardships.
Short-term savings goals: : Whether you're saving for a vacation or accumulating funds for a significant purchase, money market funds provide a balance between growth and accessibility of funds.
Risk-averse investors : For conservative investors who prioritise impact on capital and are not comfortable with stock market fluctuations, money market funds offer a relatively stable investment solution.
Retirement planning: While money market funds may not be the primary investment choice for retirement planning, they can be utilized for cash allocation within a diversified investment portfolio.

Bajaj Finserv Money Market Fund

Bajaj Finserv AMC has launched the Bajaj Finserv Money Market Fund, which is suitable for investors who seek:

  • Income over the short term.
  • Investment in money market instruments that seeks to provide reasonable returns, commensurate with low risk while providing a high level of liquidity.

It is always advisable that investors consult a financial expert if in doubt about any investment avenue.

With a diversified portfolio of short-term, low-risk debt instruments, money market funds prove to be a suitable option for both new and seasoned investors. Whether you're building an emergency fund, saving for short-term goals, or simply aiming for a stable place to park your cash, money market funds can be an essential asset to any well-rounded investment strategy. So, the next time you find yourself contemplating where to invest your hard-earned money, consider the advantages of money market funds and embrace their potential for financial growth.


Can I access my money easily by investing in money market fund?

Yes, this fund offers high liquidity and hence you can easily withdraw your money without any penalty or fees, subject to exit load, if any. These types of schemes are usually used for emergency funds or short-term needs.

What returns can I expect from money market fund?

These funds provide commensurate returns based on the underlying investments undertaken. These are usually higher than traditional investment options such as FDs or savings accounts but provide a lower return when compared to other high risk investment options. Returns on these funds are typically influenced by prevailing economic conditions. However, the returns are subject to market risk, unlike FDs or savings that tend to be fixed and stable.

How do I choose the right money market fund for myself?

Always consider factors such as expense ratio, fees, and the quality of investments it holds. Finally, opt for funds that align with your financial objectives.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views / opinions or as an investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.