General money market fund tips
Like any other investment, money market funds should only be one part of a balanced portfolio that includes longer-term investments with the potential for greater profits, such as stocks and bonds. Investors should be aware of interest rate trends and projections to ensure they’re not missing short-term opportunities.
Investors should also be aware of the expense ratios for a money market fund. High expense ratios can cut into investor profits, especially in a low-interest rate environment. The expense ratio for the typical mutual fund declined to 0.12% in 2021, meaning you’ll pay $12 annually for every $10,000 invested in a fund.
It’s important to research a money market fund before investing. The best source is generally a prospectus that outlines the fund’s strategy, past performance, management, and financial information. The prospectus will also offer valuable information about any expenses and fees.
There’s a place for money market funds in a number of portfolios, especially for investors who need a low-risk, short-term place to park money. But smart investors will follow a long-term, buy-and-hold strategy that focuses on companies with strong financial fundamentals, competitive advantages, and a bright future.
