It is highly likely that as a member of AAII you have savings or retirement money tucked away in a money market mutual fund, or indeed maybe more than one.
The Investment Company Institute, the trade association that speaks for the mutual fund industry, cited in its 2013 “Fact Book,” year-end 2011 data attributed to The IRA Investor Database showing that traditional IRA investors allocated 13.9% of their portfolios to money market funds while in their 30s and 13.9% when in their 60s. Overall, ICI stated that retirement account assets in money market funds totaled $379 billion in 2012.
Money fund investors are all given a fund prospectus that spells out the fund’s objective and what types of securities it is allowed to buy or specific security types it is not allowed to hold in its portfolio. The prospectus also covers the benchmark index used to measure investor returns, how the fund allocates its expenses, how to invest in the fund, and other pertinent information.
The prospectus and each accompanying marketing piece issued by a fund provider include some bullet points in bold type intended to make it as clear as humanly possible that a money market fund is an investment product and is not a bank product. Fund providers note in bold letters that a money market fund is not covered by bank insurance. Such communications also include an unambiguous, strong warning that there is a risk that you can lose money by investing in a money market fund. In fact, each fund offering typically includes language that is similar to this: “While the fund’s portfolios seek to maintain a stable net asset value of $1.00 per share, it is possible to lose money investing in the fund.”
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