What is the main purpose of a Money Market Fund?

The main purpose of a Money Market Fund is to provide a safe investment while maintaining liquidity. These funds are designed to invest in short-term debt securities, such as Treasury bills, commercial paper, and certificates of deposit, which typically have low risk associated with them. Because they focus on stable and low-risk investments that are easily converted into cash, Money Market Funds are suitable for investors seeking capital preservation and quick access to their funds.

This approach aligns with the needs of individuals and institutions that aim to maintain liquidity – the ability to access funds quickly and without significant loss in value. Money Market Funds often offer returns that are slightly higher than traditional savings accounts, but they prioritize safety and liquidity, making them an attractive option for conservative investors.

In contrast to this, options that suggest high-risk opportunities or long-term investments are not characteristic of Money Market Funds. These funds are inherently designed to minimize risk and ensure that investors can quickly retrieve their money, which is essential for individuals looking for short-term investment vehicles.