While the differences between Money Market Funds (MMF) and Savings Accounts can be obvious for yield-chasing aficionados, the contrasts between Money Market Funds and their equivalents are less apparent. There are different risks, and correspondingly, different yields between Money Market Funds. Being aware of and understanding these risks better equip us to choose between the options available to us.
What are Money Market Funds (MMFs)?
A Money Market Fund (MMF) is defined as a unit trust that invests mainly in very liquid fixed income products such as cash-like instruments, institutional fixed deposits and short duration bonds. These funds can normally be sold within a day for cash proceeds and have low risk.
Next, we have to understand the differences in risk before we can understand how to choose between them.
Differentiating between the types of risk associated with Money Market Funds (MMFs)
Credit risk is quite simply defined as the chance of a loss arising from a borrower not