Investing in Cash


Why are money market funds attractive to investors?

Besides the fact that money market funds are highly liquid and carry little relative risk, they also have very low (if any) costs or loads. There may also be some additional benefits for investors if the fund invests in tax-free municipal bonds (that may be exempt at the federal and/or state level for income tax purposes). Some money market funds also help a cash investor diversify his portfolio to include such investments as short-term U.S. Treasury securities (“T-bills”), certificates of deposit (“CDs”), and corporate commercial paper (of short duration).


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