Federated Money Market Funds

Federated money market funds deal with both money market funds and federated money funds. Money market mutual fund is also another term used when talking about federated money market funds. They primarily deal with short term investments that are secure and provide liquidity to the investor. Money market funds offer a peace of mind by letting the investor acquire liquidity immediately in order to take advantage of other investments. They are considered safe and stable investments. Federated money market funds offer a wider variety of options that add to the value of diversifying through money markets. In other words, federated money funds offer quite a few different types of money market mutual funds to meet the different needs of investors.

Investors who are looking for ways to increase their returns will always deal with added risk. High yield investments are associated with higher risks, while low yield investments are associated with fewer risks. The different types of federated money market funds that will be invested in will totally depend on the style of investing by the investor. Federated money market funds are not for everyone, and investors should get familiarized with how they work if they haven’t already. The times are challenging for investors but there are many alternative ways to invest.

The net asset value of federated money market funds sells shares at $1. In fact, no capital has ever been used to keep a stable NAV of $1 with federated money market funds. Even though these funds have shown to be valued at $1 over a long period of time, there still is no guarantee that they will stay there. Federated money market funds also follow strict guidelines that are outlined in the Investment Company Act of 1940. These stipulations found in the IAC limit the exposure of federated money market funds to issuers.

In order to optimize the fund’s performances, a strategic approach must be taking that doesn’t affect either liquidity or the stability of the fund. The most important part of federated money market funds is their yield. Next most important aspect is liquidity, and then preservation of capital. Strategies are built around this model to provide stability and liquidity while preserving capital by minimizing risks. There are three main aspects of federated money market funds that are observed carefully. Portfolio quality changes, maturity changes and liquidity changes all can affect the investor in both a positive and a negative way.

The quality of any portfolio can be changed when investing in federated money market funds. These changes deal with second-tier securities. Since these types of funds are primarily used for short term investments, it’s important to monitor these changes within a portfolio. The maturity dates with these types of funds were changed with the IAC in 1940. WAM, also called weighted average maturity, is now 60 days, whereas before it was 90 days. This change alone presented more opportunities to the investors during times of interest rate changes. Before, investors would have to wait 90 days before taking advantage of interest rate changes.

Finally, liquidity changes are also monitored in order to avoid loss. In order to see a return, investors must pay attention to possible market volatility that may cause a loss. Before the markets fall too much, investors will sell their federated money market funds to recover their principal. Federated money market funds are not only governed by specific rules of the Investment Company Act. They also follow the guidelines of the SEC. However, these rules allow wiggle room for investors to take advantage of possible opportunities that present themselves in the markets.

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