What is the primary function of Money Market Funds (MMFs)?

The primary function of Money Market Funds (MMFs) is to invest in securities with short-term maturity. These funds primarily focus on maintaining liquidity and capital preservation, which is particularly appealing for investors seeking a safe and accessible place to invest their cash. MMFs typically invest in government securities, treasury bills, commercial paper, and other short-term debt instruments that generally have maturities of less than one year.

This investment strategy helps ensure that the funds can provide investors with a stable net asset value, usually pegged at $1 per share, while also offering competitive interest rates compared to traditional savings accounts. By focusing on short-term securities, MMFs are able to manage risk more effectively and can offer investors quick access to their funds when necessary.