Over the years, money market funds have been the safest means of investing some cash for a long term portfolio entry or for those who want a safe place to hold their money. But recent global developments, with the world economy sagging on its knees, experts have started to point out that there are risks in money markets too. This has shed the previous thoughtline that money markets are a risk-free investment avenue. You can no longer hold it for granted that your investment is safe, just because you are in the money markets. In fact, the US Securities and Exchange Commission (SEC) decrees that while investor losses entrusted to money market funds are rare, they are very possible.
However, just as they have become risky to an extent, they have also gained on the rate of interests and profits over the last one decade. Contemporary money markets can triple your initial capital within a few years, and give an impetus to real wealth. Similarly though, just as they are profitable, they can wreck you financially in just a few hours of mishap. It is wise therefore, that before you load your cash into money markets you ensure that you know not only what they are but also how they work. This will facilitate you to know which money market risks to take and which ones are too dear or foolish to take.
Let us begin by understanding what money markets refer to, as a concept. Simply said, money market funds are