- An institutional us government money market mutual fund is a safe, stable, and liquid way to invest capital needed in a short time.
- Institutional money market funds are used by governments and corporations, because the investment requirements are very high.
- Government money market funds invest in us government securities, which have extremely low risks of default.
Why is an institutional us government money market mutual fund used? These funds are institutional money market funds, which are different from retail funds in a couple of ways. Retail funds are used by individual investors, while institutional funds are aimed at large institutions like corporations and governments. These funds have bulk trading in large amounts because institutions invest substantial capital. Institutional mutual funds have high investment requirements but in exchange they get a lower expense share than individual investors who use a retail fund will. Government money market funds take the investment pool and invest it with us government securities. These investments are extremely low risk, because the us government always pays their debt so there is almost no chance of a default and capital loss. The returns on these funds may be smaller than other investment options, because the risk is so low. Money markets have low volatility so that there are no wide swings, and the share price is stable and aims to stay at one dollar. It is very rare for the price of a share to drop below the one dollar goal. Institutions use these funds because another benefit is that they are liquid, so they are the perfect place for capital that will be needed in a little while but is not needed now. Placing short term capital in a money market mutual fund means that you can access the capital when it is needed without any penalties or delays.
An institutional us government money market mutual fund investment should be done using no load mutual funds. Load funds charge a load fee, which is comparable to a sales commission, and this is paid to the professional who is advising you on which government money market funds, or other investing options, to choose. Load fees on these funds can be hefty, as high as eight percent or more, and there are a variety of ways that these fees can be applied. Front end load fees deduct the fee from the investment capital before it is even invested, so that it comes right off of the top. Load fees can also be back end load fees, and these are charged when the shares are sold. These may be considered better than front end fees, because the entire capital amount works for the investor until the shares are sold, but these load fees are still expensive and deduct from the return on the investment. There can also be combination load fees, where front and back end load fees are both charged. Because these fees are substantial it may take a while for the investment capital to get to the starting amount again.
An institutional us government money market mutual fund investment is not for all investors, instead these funds are directed at large institutional investments. They buy shares in bulk in exchange for a lower expense share, and the fund invests in us government securities that are safe and stable. Institutional money market funds protect the investment capital in exchange for a yield that may be lower than stocks or other options, but these funds also do not carry the same level of risk either. Money market funds are used for short term investing, for money that is needed within a short period such as six months or less. Putting this capital into a money market fund ensures that when you need it you can quickly and conveniently get your investment capital back out. Most companies and government investments use institutional money market funds because of the benefits they receive when large amounts of capital are invested. No load funds can help cut down expenses as well. Choosing no load institutional funds saves expenses twice, without risking the investment capital.
