Money market mutual funds

Money market Mutual Funds:

For the cautious investor, these funds provide a very high stability of principal while seeking a moderate to high current income. They invest in highly-liquid, virtually risk-free, short-term debt securities of agencies of the U.S. Government, banks and corporations and U.S. Treasury Bills. They have no potential for capital appreciation.

Tax-exempt money market mutual funds invest in securities that provide safety of principal, liquidity and income exempt from federal income taxes by investing in short-term, high-rated municipal obligations.

Because of their short-term investments, money market mutual funds are able to keep a constant share price; only the yield fluctuates. Therefore, they are an attractive alternative to bank accounts. With yields that are generally competitive with -- and usually somewhat higher than -- yields on bank certificates of deposit (CDs), they offer several advantages:

• Money can be withdrawn any time without penalty. Money market funds also offer check writing privileges.
  

• Although not insured by the FDIC or FSLIC, money market funds invest only in highly-liquid, short-term, top-rated money market instruments.

Mutual fund Selection:

Money market funds are suitable for conservative investors who want high stability of principal and moderate current income with immediate liquidity.