Money market funds

What are money market funds?

Money Market funds are a type of mutual fund that invests in highly liquid, short term securities with minimal credit risk and low volatility. The Investments can include short-term U.S. Treasury securities, federal agency notes, repurchase agreements, certificates of deposit, corporate commercial paper, and obligations of states, cities, or other types of municipal agencies - depending on the focus of the fund.

Many investors use money market funds to store cash or as a less volatile alternative to investing in the stock market.

Most government and retail money market funds try to keep their net asset value (NAV) at a stable $1.00 per share using special pricing and valuation conventions. The NAV of a mutual fund is the fund’s total assets minus its total liabilities.

You should consider the investment objectives, risks, charges, and expenses of money market funds carefully before investing. You can find such information in the funds' prospectus available on each fund's website. Each fund's prospectus should be read carefully before investing.

Read more about Money Market Funds on the SEC’s website.

How & when can I trade money market funds?

You can enter a money market trade order at any time during normal market hours between 9:30 am - 4:00 pm ET. The order will then execute after 4pm ET. Most money market fund shares settle one business day after the trade date.

Money market funds only trade as market orders, meaning they execute at the NAV at market close. Any money market fund order will not execute until after the market closes at 4:00 pm ET.

There is a possibility that a money market fund’s NAV fluctuates below or above its NAV value and your order will fill according to the NAV calculated after 4:00 pm ET. Your trade order confirmation and the Activity tab will provide the exact price your money market fund order is filled. You can locate your trade order confirmation document inside the Frec platform by clicking on your name in the upper right corner and selecting “Account settings” then clicking on the tab titled, “Documents.” You can view all of your trade activity by clicking on the “Activity” tab at the top of Frec’s platform.

What is a Money Market Fund 7-day SEC yield?

The 7-day SEC yield is calculated by annualizing the funds daily income distributions for the previous 7 days, assuming the rate stays the same for one year and that dividends are reinvested. It is the Fund’s total income minus expenses, divided by the total number of outstanding shares and includes any applicable waiver or reimbursement. The higher the yield the higher the distribution income on the money market fund.

What is a Money Market Fund’s Expense Ratio?

The expense ratio is expressed as a percentage and represents fees charged to you as an investor to cover the fund’s operating costs on an annual basis. This fee is automatically deducted from dividend and capital gains distributions and included in the money market fund’s daily Net Asset Value (NAV). The lower an expense ratio, the higher your returns on the money market fund.

You can calculate the dollar amount of the expense ratio by multiplying the expense ratio by the dollar amount of your investment. For example, if a money market fund has an expense ratio of .25% and you own $1,000 worth of shares, you will pay $2.50 each year to the manager of the fund.

What is a Money Market Fund’s Inception Date?

The Money Market Fund’s Inception Date is the date the money market fund was first available to investors.

What is a Money Market Fund’s Minimum Investment?

The minimum investment amount is the minimum amount you are permitted to invest for your initial investment of that money market fund. For example, if the minimum investment is $300, you will be required to enter a buy order of at least $300 or more for your first trade of that money market fund.

These minimum amounts are typically set by a fund as a means to keep small, short-term trades from affecting cash flows and the fund’s daily management.

What is a Money Market Funds Dividend Schedule?

The Money Market Funds Dividend Schedule is how often the money market fund pays its investors. Money market fund dividends are declared daily and typically paid monthly. Dividends earned in a particular month generally are paid on the first business day of the following month.

Money market funds generally do not pay capital gain distributions. Keep in mind a fund may not declare or pay a scheduled dividend.

What are the risks of investing in Money Market Funds?

Money market funds are subject to three main risks: interest rate risk, liquidity risk, and credit risk.

1. Interest rate risk measures the impact of changes in rates on securities held by money market funds. If interest rates increase, the value of a money market fund’s investments generally declines and vice versa.
2. Liquidity risk can result from market volatility or from a lack of liquidity in underlying securities held by a fund.
3. Credit risk can occur if there is a failure to repay on securities, time deposits or repurchase agreements or if a credit rating of a security or issuer is reduced by a credit rating agency. Frec only provides seven money market funds and all of the funds

You could lose money by investing in money market funds. Although the funds seek to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The funds' sponsors have no legal obligation to provide financial support to the funds, and you should not expect that the sponsors will at any time.

Additionally, some money market funds may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the fund's liquidity falls below required minimums because of market conditions or other factors.

Despite the above risks, money market funds are relatively low risk compared to other mutual funds and most other investments. See SEC’s Money Market Fund description.