At the time of economic uncertainties many people try to invest in short term low risk securities that give modest returns but high stability. It is better than keeping the money idle in the form of cash in the pockets. This money gives a certain sum of returns and offers a safe place to park cash that provides accessibility to cash as and when required. In this article you’ll get to know about JP Morgan money market fund, how it works, the process, its benefits, and how to reap returns for both experienced investors and novice investors.
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What is a Money Market Fund?
A money market fund is a type of mutual fund where investors invest in short term low risk investment to maintain stability in the portfolio and provide liquidity, the users are able to access quick cash whenever necessary and invest in instruments like U.S. government securities, certificates of deposit (CDs), commercial paper, etc.
The stability and liquidity provided by this money market fund is better than the regular savings account and these are considered safe because they are of high quality and short duration. JP Morgan is one of the best wealth management companies in the world that was established in 1871 by J. Pierpont Morgan and Anthony Drexel. It has a legacy of more than 150 years and is known around the world for its reliable and attested services.
JP Morgan Money Market Funds: Overview
JP Morgan provides many types of money market funds which theatre to the different investment needs of the people. Some of the significant funds include the JP Morgan US Government Money Market Fund, JP Morgan Treasury Money Market Fund, Jp Morgan prime money market fund, etc. fund is suited for different objectives and needs of people and has its own focus like investing in US government security or treasury bills or other safe liquid assets.
The primary objective of the funds is to retain the capital while providing a small return on the invested capital in a short term while providing liquidity. They are often used as a low risk place to keep cash while generating some modest return.
JP Morgan US Government Money Market Fund
One of the best options is the JP Morgan US Government Money Market Fund which focuses on US government security or treasury bills or government back debt.
This investment is considered the most safe as it is backed by the government so it is highly secure and bolstered by the full faith and credit of the government.
The JP Morgan US Government Money Market Fund is an ideal money market fund for conservative investor so want to avoid the risk of losing their money and they also want to have quick access to the cash on the return the make from the universement. It offers a stable value which makes it an attractive choice for those who want to retain their capital.
JP Morgan Treasury Money Market Fund
The JP Morgan Treasury Money Market Fund is another good offering from JP Morgan which is slightly more specialised and focuses entirely in the U.S. Treasury securities.
It is also considered as one of the safest options of investment in the money market fund because it is provided by the US department of the Treasury.
People who want safety and stability of the returns of their investments often go for the treasury money market funds which are also a little bit higher than the modest returns offered by the money market funds. These funds are a safe haven when the market is unpredictable, volatile and in upheaval, it is also an ideal option for those people who prefer government-backed investments.
JP Morgan Prime Money Market Fund
The JP Morgan Prime Money Market Fund is a unique type of fund which is different from the government only funds. It contains a broad range of high quality short term security including both the government backed and the corporate debt. The objective of prime money market funds is to give high returns, which is more than the government only funds because it includes private sector debt.
Although it is still considered low risk and low return but it is higher than the latter one. This type of money market fund is suitable for those investors who want a bit more yield and expect more than the average money market fund but they still want liquidity and security.
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How Do Money Market Funds Work?
Money market funds by JP Morgan are invested in a short time instrument which matures in less than a year and these investments are selected to minimise the risk and ensure liquidity.
Unlike the other mutual funds whose value fluctuates a lot based on the performance of the underlying investments, money market funds are designed to maintain a stability and the value usually ranges to $1 per share. The earnings which come out of this money market funds are used in the interest which is paid to the investors as the return of the holding period on the debt instrument.
How Does JP Morgan Make Money on Money Market Funds?
JP Morgan’s way of earning from money market funds is pretty simple. They make their earning by taking management fees for operating the assets under management. The fees are usually minimal for example the JP Morgan US Government Money Market Fund charges a minimal fee for managing the investments.
The management of the low risk funds is not a fixed charge but a small percentage of the total assets that ensures that the fund continues to meet its investment objectives.
This is the way that the JB Morgan money market fund earns on already a low market fund which is low risk modern returns.
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Interest Rates and Yields
The important thing to note in a money market fund that investors looks for is the 7 day yield. It is the cons average industry over the seven days and is used to analyse the income and generates in the form of interest.
Contemporarily, JP Morgan’s Treasury Money Market Fund and other similar types of funds generate yield that deviates on the basis of the prevailing interest rates. For investors who want to generate modest returns while keeping the risk very low, this type of investment is ideal for them as it has far less volatility and risk.
Who Should Consider JP Morgan Money Market Funds?
There’s no specific pro or con about the money market fund or it cannot be stated that it will give you advantage over other types of funds. It is just that it depends upon the purpose, the intent of the investor, what type of situation is he in and what objective or goal he has with regard to his funds.
1. Conservative Investors: Many people are concerned about preserving the capital rather than achieving high return because to achieve a high return they have to take high risk. Parting with the money anytime could be the risk associated with high returns. But if they want the money for a specific purpose in the future or big purchases or emergency funds then money market funds could be used to generate low returns as well as give quick access to cash.
In that situation JP Morgan’s money market fund is a right fit.
2. Short-term Investors: Some investors strategise by keeping money invested only for a short while, maybe they are preparing for their portfolio to invest in a big or high risk security and only want to keep the fund available for that without keeping it idle. Basically it is kept for a temporary period without risking principal.
3. Liquidity Seekers: Again, people who want to have quick access to the cash but don’t want to just keep their money idle, they want to earn more than they would in a standard checking or savings account. In this regard, money market funds offer flexibility.
4. Risk-averse Investors: Conservative people are risk averse people who want to stay away from risk as far as possible. Maybe an investor wants to invest a less risky investment to balance his portfolio, in that matter, he would not at all want to invest in risky securities. Therefore, this is an ideal investment plan.
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Benefits of JP Morgan Money Market Funds
There are various benefits of the JP Morgan market funds which are described below-
- Liquidity: The money is readily available if you want to have quick access to cash. It is liquid and you can get your money anytime you want.
- Safety: The money is safe and secure as the investors put the money is U.S. government securities and high-quality debt where the funds develop high returns from the investments. These funds offer safety for your principal.
- Modest Returns: The returns may not be as high as stock and bond funds but it is still better than the traditional savings account return that you get through the interest rate while keeping your money in the bank. These investments also provide stability to the portfolio as the risk is not much.
- Diversification: Investing in money market funds can reduce the risk and can add to hedging of the portfolio by balancing a more aggressive investment portfolio.
How to Open a JP Morgan Money Market Account
Opening an account in the JP Morgan money market fund is easy as it can be done either by registering directly in JP Morgan Chase website or can be accessed through online brokerage that gives access to the JP Morgan funds.
But one has to be sure about the interest rate and that constitution, that is a management fee of the specific fund that you want to choose before choosing on online brokerage Fund or registering in the JP Morgan Chase website to open a money market account.
Is a Money Market Fund Right for You?
Money market fund is suitable for people that want to invest in short term low risk investments that are stable and give modest returns.
The return may be lower than stocks or bonds but they are still of high quality and help to provide stability in the portfolio. People who want to secure their funds and also want to earn little return on this amount, JP Morgan’s money market fund could be a great option for them.
It is important to note that money market funds are not insured by Federal Deposit Insurance Corporation, a federal institution. However there’s low risk of losing the money in a money market fund because they are usually invested in government-backed or treasury-focused funds.
Conclusion
When the economic conditions are uncertain and the market cannot be predicted then investing in a money market fund can be a good option to provide security and liquidity.
Whether you want to invest in JP Morgan US Government Money Market Fund, JP Morgan Treasury Money Market Fund or JP Morgan Prime Money Market Fund, all the money market funds have the common feature of being a low risk short term security that protects principal while it gives a modest return.
It is a perfect choice for both the novice or the expert investors who are looking to hedge their portfolios as a means of diversifying their investments to balance the risk of the portfolio. Also it ensures that people have quick access to funds without sacrificing too much in terms of returns. JP Morgan’s money market funds are one of the safest options available in today’s financial market to invest in.