Key Differences Between Money Market and Mutual Funds

There are some key differences between money market funds and mutual funds. Knowing these differences can help you choose which fund is right for you to put your money in.

When you put your money in a mutual fund you are buying a fraction of the shares of all the companies¬† in that mutual fund. With a money market fund the share price is always a dollar and it’s the interest rate of the money market fund that fluctuates, not its share price.

Money market funds are managed in a way that keeps growth very conservative. If you invest in a money market fund you can set up a checking account along with it. You can open a money market fund through most banking and financial institutions.

You can withdraw or deposit money in to your money market fund and it’s as simple as depositing cash into your regular checking account. Additionally, you can withdraw cash immediately. There are some limitations to this account though. Often times you can only write a certain number of checks in a month.

With mutual funds there is no bank account for withdrawing or depositing your money. However, these types of funds are managed in a way that is much more strategic in terms of making their investors money. The managers of mutual funds look to build a portfolio of companies that creates diversity, stability and growth. This is the fund you want to put your money in if you do not need access to it immediately, but want to see good growth gains in years to come.

2 Responses to “Key Differences Between Money Market and Mutual Funds”

  1. STU L March 5, 2012 at 1:59 pm #

    This the very thing I thought might work for my former co-workers. They’re trapped in a choice of 4 mutual funds with S–L-fe which are tracking sideways or down 2.5% as one guy reported.And this is while they get a matching 0.40c on the dollar from the company! They have the option of a money market fund as well. I suggested transferring to the MMFund to reduce the MER to below 1% with the potential of earning 1-2% and not lose any of the match from the company. In most cases there’s no fee or a low fee to transfer.

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