Money market funds – what are they and what you need to know
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Archived article Tax, investments and pension rules can change over time so the information below may not be current. This article was correct at the time of publishing, however, it may no longer reflect our views on this topic.
With interest rate rises boosting our cash savings, we look at other lower risk options to make the most of your money.
This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.
21 July 2023
Significant interest rate rises over the last 18 months have made returns on cash more attractive than they’ve been in years. Savings rates have spiked, meaning investors have reallocated money to cash and cash-like investments so they can lock in what are considered to be ‘risk-free’ returns – enter money market funds.
Money market funds are mainly invested in a combination of very short-dated investments.
Their purpose is to give a return that’s slightly higher than what you can get from cash at the bank, after fees.
As is always the case, you don’t get something for nothing, so the higher return compared to cash comes at a level of higher risk.
These funds invest in different types of assets that all have a short period of time until they mature. This means the
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