Money market fund assets rise to $2.551 trillion
The Associated Press
Published: Thursday, Jul. 12, 2012 - 3:15 pm

NEW YORK -- Total U.S. money market mutual fund assets rose $18.56 billion to $2.551 trillion for the week that ended Wednesday, the Investment Company Institute said Thursday.

Assets of the nation's retail money market mutual funds fell $1.56 billion to $886.34 billion, the Washington-based mutual fund trade group said. Assets of taxable money market funds in the retail category fell $2.39 billion to $698.15 billion. Tax-exempt retail fund assets rose $830 million to $188.19 billion.

Meanwhile, assets of institutional money market funds rose $20.13 billion to $1.665 trillion. Among institutional funds, taxable money market fund assets rose $21.18 billion to $1.579 trillion. Assets of tax-exempt funds fell $1.05 billion to $86.01 billion.

The seven-day average yield on money market mutual funds was 0.03 percent in the week that ended Tuesday, unchanged from the previous week, said Money Fund Report, a service of iMoneyNet Inc. in Westborough, Mass.

The 30-day average yield was also unchanged from last week at 0.03 percent. The seven-day compounded yield was flat at 0.03 percent. The 30-day compounded yield also remained at 0.03 percent, Money Fund Report said.

The average maturity of portfolios held by money market mutual funds stayed at 45 days.

The online service Bankrate.com said its survey of 100 leading commercial banks, savings and loan associations and savings banks in the nation's 10 largest markets showed the annual percentage yield available on money market accounts was unchanged at 0.12 percent from the previous week.

The North Palm Beach, Fla.-based unit of Bankrate Inc. said the annual percentage yield available on interest-bearing checking accounts was also unchanged from the week before at 0.06 percent.

Bankrate.com said the annual percentage yield on six-month certificates of deposit was unchanged from the previous week at 0.2 percent; down to 0.31 percent from 0.32 percent on one-year CDs and remained at 0.51 percent on two-and-a-half-year CDs. It fell to 1.09 percent from 1.1 percent on five-year CDs.
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Money Market Fund- Why Invest?

Why Invest in a Money Market Mutual Fund?

A mutual fund is nothing more than stocks & bonds. You can think of a mutual fund as a company that brings together a group of people and invests their money in stocks, bonds, and other securities. Each investor owns shares, which represent a portion of the holdings of the fund similar to every other type of Mutual Fund.

You can make more money from a Money Market Mutual Fund in three ways:

1) Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all of the income it receives over the year to fund owners in the form of a distribution.

2) If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution.

3) If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit.

Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earnings and get more shares.

Advantages of Mutual Funds:

Professional Management - The primary advantage of funds (at least theoretically) is the professional management of your money. Investors purchase funds because they do not have the time or the expertise to manage their own portfolios. A mutual fund is a relatively inexpensive way for a small investor to get a full-time manager to make and monitor investments.

Diversification - By owning shares in a mutual fund instead of owning individual stocks or bonds, your risk is spread out. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. In other words, the more stocks and bonds you own, the less any one of them can hurt you (think about Enron). Large mutual funds typically own hundreds of different stocks in many different industries. It wouldn't be possible for an investor to build this kind of a portfolio with a small amount of money.

Economies of Scale - Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than what an individual would pay for securities transactions.

Liquidity - Just like an individual stock, a mutual fund allows you to request that your shares be converted into cash at any time.

Simplicity - Buying a mutual fund is easy! Pretty well any bank has its own line of mutual funds, and the minimum investment is small. Most companies also have automatic purchase plans whereby as little as $100 can be invested on a monthly basis.

Disadvantages of Mutual Funds:

Professional Management - Did you notice how we qualified the advantage of professional management with the word "theoretically"? Many investors debate whether or not the so-called professionals are any better than you or I at picking stocks. Management is by no means infallible, and, even if the fund loses money, the manager still takes his/her cut. We'll talk about this in detail in a later section.

Costs - Mutual funds don't exist solely to make your life easier - all funds are in it for a profit. The mutual fund industry is masterful at burying costs under layers of jargon. These costs are so complicated that in this tutorial we have devoted an entire section to the subject.

Dilution - It's possible to have too much diversification. Because funds have small holdings in so many different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money.

Taxes - When making decisions about your money, fund managers don't consider your personal tax situation. For example, when a fund manager sells a security, a capital-gains tax is triggered, which affects how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability.
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Money Market Mutual Funds


A money market mutual funds investment fund that holds the objective to earn interest for shareholders while maintaining a net asset value (NAV) of $1 per share. Mutual funds and banks offer these safe investment funds. Investor portfolios are comprised of short-term periods representing high-quality, liquid debt and monetary instruments.
A money market fund's purpose is to provide investors with a safe investment with easily accessible cash-equivalent assets characterized as a low-risk, low-return investment. Because of their relatively low risk & low returns, investors, such as those participating in employer-sponsored retirement plans, might not want to use money market funds as a long-term investment option.

As you probably know Money Market Mutual Funds have become extremely popular over the last 20 years. What was once just another obscure financial instrument is now a part of our daily lives. More than 80 million people, or one half of the households in America have money in mutual funds. That means that, in the United States alone, trillions of dollars are invested in mutual funds.

Originally, Money Market Mutual Funds were heralded as a way for the little guy to get a piece of the market. Instead of spending all your free time buried in the financial pages of the Wall Street Journal, all you had to do was buy a mutual fund and you'd be set on your way to financial freedom. As you might have guessed, it's not that easy. Mutual funds are an excellent idea in theory, but, in reality, they haven't always delivered. Not all mutual funds are created equal, and investing in Money Market Mutual Funds is not as easy as throwing your money at the first salesperson who solicits your business.

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A leading Money Market Mutual Fund provider of independent investment research, today reported estimated U.S. mutual fund asset flows through June 2012. Long-term mutual funds recorded their lowest monthly intake year to date with just $10.8 billion in new money, and money market funds saw outflows of $30.1 billion after tepid May inflows of $1.4 billion.

Additional highlights from Morningstar's report on mutual fund flows:

    Investors seem to have renewed their faith in municipal-bond funds and are increasingly comfortable taking on risk in search of yield. High-yield muni bond funds took in $6.7 billion through June, as the category's median return was 6.7% in the first half of the year.
    The balanced asset class, which includes primarily allocation funds, saw redemptions of $890 million in June, its first month of outflows in 2012. Some of the world-allocation category's most prominent offerings suffered outflows; BlackRock Global Allocation, IVA Worldwide, and Ivy Asset Strategy lost $460 million, $232 million, and $171 million, respectively.
    Taxable-bond funds saw inflows increase by more than $3.2 billion over last month to $10.9 billion. U.S.-stock funds remained in familiar territory with outflows of $8.5 billion, while international-stock funds, driven by inflows to diversified emerging-markets funds, collected $4.8 billion.
    DoubleLine Total Return Bond led all funds in June with inflows of $2.1 billion. It leads all funds over the trailing 12 months, too, with $18.1 billion in new assets. 
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