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Aditya Birla Capital LimitedAditya Birla Capital Limited (“ABCL”) is a listed systemically important non-deposit taking Non-Banking Financial Company (NBFC) and the holding company of the financial services businesses. ABCL and its subsidiaries/JVs provides a comprehensive suite of financial solutions across Loans, Investments, Insurance, and Payments to serve the diverse needs of customers across their lifecycles. Powered by over 61,600 employees, the businesses of ABCL have a nationwide reach with over 1,690 branches and more than 200,000 agents/channel partners along with several bank partners.
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What is a Money Market Fund?
Money Market Funds are subcategories of debt mutual funds. These funds invest in debt instruments with a maturity of up to one year.
Advantages of Money Market Funds
Low risks
Being debt-oriented, money market funds have low volatility risks and offer stable returns on your investment.
Short-term investment
Money market funds are suitable short-term investments, which offer relatively higher returns compared to liquid and ultra short term debt funds.
Cost-effective
Money market funds have low expense ratios and make for a cost-effective investment avenue.
Better Returns Than Savings Accounts
Money market funds offer fixed interest rates higher than traditional savings bank accounts.
Explore Money Market Funds
Most Popular
AUM: 23427(Cr)
Risk: Very High
- MIN. INVESTMENT 500
- 5 YRS RETURNS 33.32%
- Invest (Per Month) ₹10000
- Get (30 Yrs) ₹24,850*
*Projections/estimations is backtested using historical data.
Most Popular
- AUM: 23427(Cr)
- Risk: High
- MIN. INVESTMENT 1000
- 5 YRS RETURNS 33.32%
- Invest (Per Month) ₹15000
- Get (30 Yrs) ₹34,850*
*Projections/estimations is backtested using historical data.
Money Market Funds Returns Calculator
REGULAR INVESTMENT
SIP
Invest systematically in regular amounts and build a corpus with a disciplined investing habit.
START SIPONE TIME INVESTMENT
Lump sum
Invest once with the facility of lump sum investing and save at your will. Time the market correctly and earn good returns.
INVEST LUMPSUMTotal Amount Invested
₹ 0
after 30 years you will get a return of
₹ 0
Disclaimer: Projections/estimations is backtested using historical data.
Total Amount Invested
₹ 0
after 30 years you will get a return of
₹ 0
Disclaimer: Projections/estimations is backtested using historical data.
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Understanding Money Market Funds
Table of Contents
What are money market funds?
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Money market funds are open-ended debt funds that invest in money market instruments maturing within a year. The securities in the portfolio have a wide range of maturity periods where the maximum maturity is a year. This makes money market funds a suitable short-term investment avenue.
What are the features of money market funds?
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These funds have low risks and the potential to yield good returns.
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There’s no capping on the maximum investment amount
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No exit load is charged on redemptions
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Credit risk and interest rate risk are low since the maturity of the underlying securities is low
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You can choose the Systematic Transfer Plan (STP) and transfer your investment from money market funds to equity funds at regular intervals
Things to keep in mind when investing in money market funds
Money market funds are not completely risk-free. The returns are subject to market risks
Check the expense ratio of these schemes. Though the ratio is low, choose a fund which has the lowest ratio for maximum investment
Compare money market funds on their returns too. A fund with the highest return is better
What are the types of risks that money-market mutual funds face?
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Credit risk
Risk of default on the debt instrument
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Interest rate risk
Risk of rising interest rates, which reduces the value of debt instruments
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Reinvestment risk
Risk of not getting good returns on reinvestment
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Inflation risk
Risk of inflation reducing the returns from the debt fund
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Liquidity risk
Risk of not being able to trade in debt instruments
What is the tax implication of money market funds?
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Returns earned are taxed at your income tax slab rates
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Dividends earned, if any, are taxed at your income tax slab rate
What are the payout options?
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Dividend option
Earn dividends on your investment at regular intervals
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Growth option
Accumulate the returns over the investment tenure and get a lump sum amount on redemption
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FAQs On Money Market Funds
All short-term funds and debt funds have certain similar features. A money market fund is defined by its (ideally) 1-year investment horizon, underlying investments regulated by the RBI, and low-risk nature.
Money market funds are mostly invested in treasury bills, certificates of deposit, repurchase agreements, and commercial papers.
Money market mutual funds’ risk profile is considered moderate compared to other debt funds
Money market mutual funds are good for an investment horizon of up to a year.
The things to consider before investing in money market funds are risks, historical fund performance, expense ratio, taxation, and investment horizon.
The main disadvantage of money market funds is that they usually provide lower returns than other lucrative mutual funds, such as equity-oriented funds. However, they also provide more stability and safety than equity-oriented funds.
First-time investors can learn the basics of investment with money market funds and then smoothly transition into high-risk-high-reward investment options.
Money market funds are best suited for short-term investment goals (within a year).
Money market funds provide better return potential than bank deposits and savings bank accounts. However, they do come with a certain amount of risk. Hence, please evaluate your risk tolerance before making a choice.
No, money market funds usually offer relatively lower returns at a relatively low risk than bond funds.
Money Market Debt Mutual Funds are ideal for an investment horizon of at least 1 year.
Money market funds are a type of mutual fund, so the comparison between the two is not accurate. Money market funds are a specific category of mutual funds that invest in short-term, low-risk instruments. The choice between different mutual fund types depends on your investment goals, risk tolerance and time horizon.
The money market accounts are deposit accounts, which are situated in banks. They are ideal for short-term savings and emergency funds that you want to access within a short time.
Indeed, money market funds are safe. Money market funds allocate investments into short-term and highly secure debt securities, minimizing risk. Although not entirely risk-free, the stability of these investments is generally considered reliable.
The money market yields are pretty low because they hold up all the securities with maturities for up to 1 year.
Types of Debt Mutual Funds
Funds Based On Duration
Funds Based On Portfolio Allocation
Other asset class funds
Equity Fund
Give your savings the growth they deserve. Invest in Equity Funds and unlock the potential of long-term growth
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Fund of Funds
Mutual funds that invest in other mutual funds both in India and globally
Hybrid Funds
Get a mix of equity, debt and other asset classes for a diversified portfolio
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Index Fund
Passively-managed mutual funds tracking a particular index
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ETF Funds
Invest in funds listed and traded on the stock exchange