Money market mutual funds: Why should you invest in them for long term wealth creation?

livemint.com:

debt mutual funds that invest their assets in highly liquid assets such as cash and cash equivalents. These funds offer high liquidity coupled with a low level of risk. It is worth remembering that they are not as safe as cash, however, their risk level is extremely low.

They are considered good for transient investment and investors usually park their money in these schemes for a short period of time before they decide about their target investment. So, investing in money market funds is not advisable for a long duration. 1.

Regular income: A key reason for investing in money market funds is to generate income and to ensure a regular cash flow rather than looking at increase in capital. 2. Short-term horizon: These funds are ideal for a short-term horizon.

Those looking at a long-term horizon may consider money market funds as a stop gap arrangement until they find the long-term funds to invest. 3. Low risk: Since these funds are extremely low on risk, they are a good investment for the investors with a low-risk appetite.

Some of the key money market instruments include treasury bills (T-bills), certificate of deposit, repurchase agreements and commercial papers. T-bills: They are issued by the government as a promissory note with guaranteed repayment at a later date. They are primarily short-term borrowing tools, Certificate of deposit:It is a fixed income financial tool governed by the RBI and the withdrawal amount is guaranteed from the start.

It could be issued by a financial institution or commercial bank. Repurchase agreements: A repurchase agreement is a contract in which the borrower lends a security to the lender for cash with an agreement to buy it back after a short period at a predetermined price. Commercia