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.
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.
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.
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.
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.
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.
