Money Market Funds | Fidelity Institutional (2024)

FAQs

What is an institutional money market fund? ›

A money market fund is a kind of mutual fund that invests in highly liquid, near-term instruments. These instruments include cash, cash equivalent securities, and high-credit-rating, debt-based securities with a short-term maturity (such as U.S. Treasuries).

Invesco Premier Institutional has the highest yield of all funds on our list. That's due to a portfolio that consists mainly of short-term, high-credit-quality money market instruments.

Retail funds offer investment opportunities primarily to individual investors rather than institutional investors. They trade on the open market. Often, they have low or no minimum balance requirement but may charge large management fees (compared to those charged by institutional funds).

Variable Share Price Prime Money Market Funds are designed for institutional investors but are available to all investors. These funds invest in taxable short-term obligations issued by corporations and banks, as well as repurchase agreements and asset-backed commercial paper.

How safe are money market funds? There is little risk associated with money market funds. The U.S. Securities and Exchange Commission (SEC) mandates that only the highest-credit-rated securities are available in money market funds.

Knowledge and research. Institutional investors tend to have a significant advantage over individual investors in investment knowledge and research. Institutional investors have more resources, allowing them to conduct more detailed research and therefore make more informed investment decisions.

Vanguard Treasury Money Market Fund

This fund only invests in US Treasuries and repurchase agreements insured by the federal government, making it among the safest in a category of relatively safe investments. The weighted average maturity of the fund's holdings is 43 days.

A money market fund might have once offered the highest return for your buck. But insured money market and savings accounts may offer competitive rates without the management fees, and with federal insurance for up to $250,000. So, be sure to compare the terms and rates with each.

Money market funds can protect your assets during a recession, but only as a temporary fix and not for long-term growth. In times of economic uncertainty, money market funds offer liquidity for cash reserves that can help you build your portfolio.

Institutional and retail traders play distinct but significant roles in the financial markets. While institutions have advantages such as access to more financial instruments and extensive resources, retail traders have the flexibility and freedom in trading decisions.

Are institutional investors good or bad? ›

Institutional investors are entitled to preferential treatment and lower fees. They are also subject to fewer protective rules because they are more qualified traders than individuals and thus better able to protect themselves.

Mutual funds offer various classes of shares, with institutional shares being reserved for institutional investors and typically having the lowest expense ratios. Institutional shares have their own fee structuring and investing specifications, compared to retail shares.

VMMXX-Vanguard Cash Reserves Federal Money Market Fund | Vanguard.

The seven-day yield is a method for estimating the annualized yield of a money market fund. It is calculated by taking the net difference of the price today and seven days ago and multiplying it by an annualization factor. Since money market funds tend to be very low risk, the higher the seven-day yield the better.

How does a money market fund work? Like other mutual funds, money market funds sell shares to investors who can then earn income from the portfolios. MMFs blend highly-rated, short-term securities with longer-dated securities (up to 397 days for most funds).

Low Risk and Short Duration

As stated above, money market funds are often considered less risky than their stock and bond counterparts. That's because these types of funds typically invest in low-risk vehicles such as certificates of deposit (CDs), Treasury bills (T-Bills), and short-term commercial paper.

A market can be described as a money market if it is composed of highly liquid, short-term assets. Money market funds typically invest in government securities, certificates of deposit, commercial paper of companies, and other highly liquid, low-risk securities.

The security of a GIC comes with limited liquidity. Money market funds can provide more flexibility and liquidity, making them suitable for those who prioritize quick access to funds. GICs pay interest at the end of the term, while money market funds pay interest regularly.