Finance: What is a Money Market Fund?

What is a Money Market Fund/Commercial Paper? Money Market Funds are mutual funds that are very safe and liquid. They invest in cash and securities with short-term maturities. Commercial paper is similar in that it has the short-term aspect. It is different because it’s issued by companies and used to take care of various financial obligations in the short term, or to buy inventory.

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Transcript

00:28

you invest in a nice fixer-upper home or a tractor distribution company or shares

00:34

in a fat dividend-paying bank you're investing for presumably a long time [people stand in line]

00:40

like years maybe decades maybe centuries if you can find the right miracle pill.

00:44

but here we're talking about money like the stuff you can buy candy with. so it's

00:49

short term not long and a money market fund basically comprises many series of

00:55

pretty safe bonds that are all coming due in the next 30 to 90 days. sometimes [pie chart]

01:00

longer than that sometimes shorter but generally in the very near future. so why

01:04

would you care about a money market fund? well because it pays you slightly more

01:09

interest on your money than say a bank checking account. and lots of people in

01:13

corporations need cash just sitting around to pay their bills, so there are

01:18

tons of money market funds out there available and that's the gist of a money

01:21

market fund. we're sure you'll have plenty of experience with them by the

01:25

time you hit your sixth hundredth birthday day [people cheer and hold birthday cake]