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What Are Money Market Funds & Who Should Invest?

This story will help you understand the various securities involved in the Indian money market, how money market funds leverage the money market to generate returns, and how to invest in the best money market funds using Cube Wealth.
November 8, 2024
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Debt funds like liquid funds, overnight funds, ultra short term funds, and money market funds may seem to invest in the same type of debt instruments. 

However, the similarities end when you actually put each fund under the microscope and understand the subtle differences between the debt instruments that a liquid fund invests in and the money market that money market funds invest in. 

In this blog, we will help you understand the money market and how money market funds work to generate returns from these money market instruments.

What Is The Money Market? 

A money market is an umbrella term used for the exchange of short term debt instruments between financial institutions and banks. The duration of lending in the money market ranges from 1 to 270 days.

The securities exchanged in the money market are typically very short term instruments like Commercial Paper, Certificate of Deposit, Treasury Bills, etc.

Broadly speaking, there are two ways to invest in the money market:

  • Buying CP, CD, Treasury Bills, etc. on your own 
  • Invest in Money Market funds

What Are Money Market Funds?

A money market fund is a debt fund that invests in money market instruments like CD, CPs, repo agreements, etc. It is a fixed income debt inst

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